Global / Coronavirus Insights
Coronavirus Update: Industry Fast Facts

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by IBISWorld
Jun 01 2020

IBISWorld presents a collection of fast facts that outline how the spread of COVID-19 (coronavirus) is impacting sectors across the countries where IBISWorld operates, including Australia, Canada, Germany, New Zealand, the UK and the US.  

Jump to a sector to find out more:



Agriculture, Forestry & Fishing COVID-19 Sector Update

Australia

  • According to the Australian Bureau of Resource Economics and Sciences, the largest threat to agricultural firms comes from declining global incomes, which will likely drive prices down.

  • Declining export demand for produce has increased local supply, placing downward price pressure for some goods. For example, seafood prices have declined due to reduced demand from export markets and the food-service sector. However, prices for other items, such as beef, are anticipated to rise as farmers take the opportunity to rebuild their herds, reducing supply.

  • Falling global retail sales are expected to negatively affect demand for cotton and wool as apparel companies reduce production. This trend is anticipated to reduce prices and revenue generated by Australian cotton and wool growers.

  • The Federal Government funded a $110.0 million freight subsidy to assist industry exporters, as a reduction in international flights has caused freight costs to skyrocket. The first special flight funded by this subsidy departed in early April 2020.

  • The Federal Government has also announced several other measures to assist agricultural firms, which have been affected by both the summer 2020 bushfires and the COVID-19 outbreak. These measures include allowing working holidaymakers to extend their visas by working in the agriculture sector and ensuring the domestic freight network’s continued operation.

  • State and territory governments have implemented policies to support the agriculture sector. The Queensland Government launched a $3.7 million assistance package for the Fishing industry, which includes grants to develop downstream markets and waives some quota fees. The Tasmanian Government removed the requirement for seafood businesses to lodge payroll tax for the three months through May 2020.

  • The NSW Government has announced a $140.0 million package to support agricultural businesses affected by the summer 2020 bushfires. This package is anticipated to particularly benefit operators in the Forestry and Logging industry, which were affected by the bushfires and face weaker demand due to the COVID-19 outbreak.

Canada

  • This sector is expected to experience asymmetric setbacks from the coronavirus outbreak, as some industries are more dependent on exports than others. For example, the Fishing & Seafood Aquaculture industry is expected to experience a decline exports to China. According to the Conference Board of Canada, live and fresh lobster exports to China were valued at more than $450.0 million in 2019.

  • Due to higher costs and a shortage of workers, farmers across Canada have begun to discuss the possibility of not planting a crop in 2020. Farmers, aided by the Canadian Federation of Agriculture (CFA), have requested financial assistance from the federal government to operate in this difficult landscape. The CFA has requested the establishment of an emergency fund in the amount of $2.6 billion.

  • The Canadian logging industry has experienced about 40 temporary sawmill closures over the past few weeks, with operators citing a plunge in industry prices. Additionally, the closure of upstream pulp and wood chip manufacturers has forced some industry operators to suspend operations despite steady demand for products like toiler paper and paper towels. In response, the Forest Products Association of Canada has begun to advocate for a federal relief program directed at industry operators.

  • Already one of the most highly regulated sectors in Canada, operators in this sector face increased scrutiny with regards to food production and distribution. To limit the spread of the coronavirus, regulators continue to increase sanitation requirements, in addition to minimizing transportation of sector products.

  • Concerns about the potential transmission of the coronavirus among animals will require further monitoring. Previous outbreaks, such as the swine flu and bird flu, have shown the ability to spread among humans and animals. At this time, all reports indicate than transmission from animals to humans is not possible.

  • The federal government of Canada recently announced a $1,500 payment for each temporary worker that farmers employ, highlighting the importance of these workers to this sector.

  • In early May, the government announced a $252.0 million aid package for Canadian farmers. This package will be spread across the sector with the aim of alleviating some of the financial difficulties that operators have faced.

 Germany

  • Several cases of infection among employees of slaughterhouses have brought them into massive criticism, so that the government is debating new rules for occupational health and safety in this industry.

  • Due to the closure of many inner-European borders, farmers are lacking Eastern European harvest helpers for asparagus harvesting and spring sowing of other vegetables. This could lead to a shortage of domestic fruit and vegetable supply. Milk production is massively affected by the coronavirus, leading to falling milk prices. Although the demand for dairy products from supermarkets is rising sharply, the demand from large consumers like restaurants or hotels has declined significantly. The dairies are already calling for a reduction in milk production.

New Zealand

  • Kiwifruit producer Zespri has stated that demand for its produce has been high. The company has signed an agreement with China’s largest online retailer, JD.com, to supply 1.2 million trays of kiwifruit in 2020.

  • A depreciating New Zealand dollar has supported agricultural firms, as the dollar’s depreciation has offset falling global prices. Nevertheless, the COVID-19 outbreak is expected to negatively affect global demand for agricultural commodities, placing downward pressure on prices.

  • Sheep and beef cattle farmers were benefiting from higher demand and higher lamb prices as a result of an African Swine Fever outbreak in China. However, demand has subsequently fallen, placing pressure on these farmers. The resulting increase in domestic supply is expected to further negatively affect farmers, with some meat prices, such as for lamb, already declining in the domestic market. Beef prices are anticipated to remain high in the 2021 financial year as production declines.

  • The Fishing and Aquaculture industry has been significantly affected by the COVID-19 outbreak, as deteriorating economic conditions in domestic and export markets have negatively affected demand. As a result, the government allowed commercial fishers to release some caught rock lobsters back into the wild. Furthermore, 10.0% of the uncaught Annual Catch Entitlement for rock lobster fishers will be allowed to be carried forward into the next fishing year.

  • The New Zealand Government has announced a $330.0 million International Air Freight Capacity scheme to support exporters of high-value products, as the reduction in global air travel has made air freight services increasingly unaffordable. This scheme is expected to particularly support seafood producers, which must get their produce to market in a timely manner.

  • Demand will likely increase for fresh produce and dairy over the long term due New Zealand’s reputation for high-quality produce in export markets.

  • Many agricultural businesses have had to suspend operations to comply with Alert Level 4 lockdown requirements, including forestry and floriculture firms, as they were not deemed essential services. These firms have largely been able to resume operations under the Alert Level 3 restrictions, which came into effect on 28 April 2020. New Zealand’s move to Alert Level 2 restrictions has allowed cafes and restaurants to reopen, supporting demand for agricultural produce.

United Kingdom

  • Farming leaders and unions have expressed concerns about labour shortages, with the CLA estimating a shortage of 80,000 workers as the industry approaches peak season. Despite industry recruitment campaigns, including the government’s pick for Britain portal, industry representatives have suggested that farmers still need up to 40,000 British residents to harvest fruit and vegetables.

  • The Crop Farming industry is expected to be negatively affected by reducing prices of global crops. Soya, rapeseed and wheat have already been negatively affected.

  • Sales by liquid milk processors servicing food service or wholesale markets are reported to have dropped between 50.0% and 60.0%.

  • The outbreak has caused a severe demand shock for British fishers, as a result of plunging demand from export markets and domestic restaurants.

  • Many farmers are hopeful that the current situation that highlight the importance of domestic food supply, which could shape the government’s long-term policy approach after leaving the EU’s Common Agricultural Policy.

United States

  • This sector is expected to experience modest setbacks because of its relatively low dependence on exports, accounting for approximately 16.0% of total sector revenue. However, this should be contextualized by recalling that the Agriculture Sector is the only sector of the economy the United States which has a trade surplus with China, the nation’s largest trading partner, so impacts as a result of a pullback in international trade with China could more adversely affect this sector than others.

  • As exports to China are reduced, it is likely that US producers will need to cut back on supply, causing domestic prices to rise and potentially limiting demand for Agricultural Sector products. This will erode consumer surplus and ultimately cause sector revenue to decline.

  • Despite potential concerns for workforce reductions, a large portion of sector labor is seasonal and hired on a rolling basis. Therefore, it is not expected that the Agriculture Sector will exhibit labor shortages, which could compound potential price increases as a result of a pullback in domestic agricultural production.


Mining COVID-19 Sector Update

Australia

  • Weakening global manufacturing activity is anticipated to weigh on commodity prices, particularly for crude oil, coal, copper, iron ore, and other industrial commodities. Operators are therefore anticipated to significantly reduce capital expenditure and delay investment in new projects.

  • Supply disruptions associated with quarantine efforts are expected to ripple through the global economy, disrupting manufacturing worldwide. This is expected to be compounded by an associated decline in demand as consumer sentiment weakens. As a result, the demand for energy and minerals produced by Australian firms is expected to fall.

  • COVID-19 could disrupt the demand for steel through hindering manufacturing activity, which could significantly reduce the demand for iron ore and black coal, presenting a major threat to Australian miners.

  • A slowdown in domestic construction activity, particularly in the residential sector, is anticipated to impact demand for some operators in the division.

  • Precious metals producers are likely to benefit as risk adverse investors transition into safe haven assets such as gold, silver, and palladium. Australian miners are likely to directly benefit from strength in gold prices.

  • Revenue for the Gold Ore Mining industry is projected to increase by 4.7% in 2019-20

  • Revenue in the Coal Mining industry is expected to fall by 11.7% in 2019-20.

  • On the back of declining oil prices, revenue in the Oil and Gas Extraction industry is anticipated to fall by 8.2% in 2019-20.

  • With output and copper prices declining in the current year, revenue in the Copper Ore Mining industry is projected to decline by 7.7% in 2019-20.

Canada

  • Since this sector is highly globalized and dependent on commodity prices, it is expected to be one of the hardest-hit sectors in the Canadian economy. A drop in Chinese consumption of raw materials will bring overall oil and gas prices down. Demand for jet fuel has already declined, and natural gas prices have declined to a record low. This will curtail Canadian production.

  • The Oil and Gas Extraction subsector will likely curb oil drilling to adjust to lower demand levels. The price of Western Canada Select crude is down, trading at all-time lows in recent weeks. As a result, many domestic operators have slowed or halted operations.

  • Gold prices are rising in Canada as investors shy away from risky assets in this time of uncertainty. In fact, gold prices in Canada recently reached their highest level since 2013.

  • Further damaging this sector, is the close proximity of workers to each other during operations. Most health organizations have advised social distancing protocol, which dictates at least six feet of separation between individuals. Some operators have recently increased investment in autonomous mining technologies to replace workers, something that had already been in development, though less urgently.

  • Operators have cited rising costs as a result of closures and a less production. Additionally, provinces, such as Quebec, have mandated all development and exploration projects, hurting some operators. Newmont Corporation, an industry leader, recently announced that it would resume operations at some of its Canadian gold mines.

Germany

  • As demand for fuel has dropped due to declining travel activity and shrinking production volume, oil prices have dropped, thus furthering the ongoing decrease in oil drilling. 

  • The operational impact of COVID-19 on domestic opencast lignite mining has only been minor so far, yet the downturn in economic activity has decreased overall energy consumption and thus mining activities have been scaled back. Since brown coal is primarily used for domestic electricity generation, lignite mining is a key part of the critical infrastructures in Germany and mining companies have introduced contingency plans at their production sites.

  • Gravel extraction and natural stone quarrying are sensitive to changes in downstream demand and may need to restrict operations in the future if domestic construction activities are slowing down. However, until now the repercussions of the pandemic on the industry have not reached a significant level yet.

New Zealand

  • New Zealand’s mining division is heavily reliant on global markets, with weakening global demand and falls in the price of key commodities, including oil, coal and copper, anticipated to weigh heavily on sector performance over the year.

  • In the Iron Ore Mining industry, exports were expected to account for 38.2% of revenue in 2019-20, but this proportion is now anticipated to be lower. As virtually all exports from the industry go to China and Japan, a slowdown in manufacturing activity in both these countries is expected to depress demand for iron ore, contributing to a significant decline in exports. As China accounts for over 95.0% of New Zealand’s iron ore exports, reduced production from Chinese steel mills represents a major threat for iron ore producers in New Zealand.

  • Export markets were anticipated to account for almost 60.0% of revenue for coal miners in 2019-20, with India, Japan and China accounting for over 80.0% of New Zealand’s coal exports. As demand for coal falls, oversupply conditions are expected to cause export prices to decline, reducing revenue for coal miners in New Zealand. Coal miners in New Zealand have a limited capacity to redirect exports to alternative markets.

  • Operators in the Gold Ore Mining industry are expected to benefit from the COVID-19 outbreak, as rising uncertainty drives demand for safe haven assets such as gold and other precious metals. Gold producers in New Zealand are likely to benefit from higher gold prices.

  • To address an oversupply in global markets, OPEC+ agreed to curtail oil production by approximately 10.0% (9.7 mb/d), from the start of May. However, oil prices are anticipated to remain subdued due to weak demand conditions.

  • With New Zealand moving to Alert Level 2 restrictions on 14 May, mining operations that were required to shutdown have now been allowed to reopen. However, commodity prices and demand conditions are anticipated to remain subdued.

United Kingdom

  • Coronavirus spread has caused the price of oil to fall as demand has decreased. Travel bans and weaker production have led to decreased demand; this had led to lower oil prices, negatively affecting the Mining sector. Mining operators may also have to lay off some workers or send workers home in order to limit spread.

  • The International Energy Association states that global oil demand is expected to decline in 2020 as the impact of COVID-19 spreads around the world, constricting travel and broader economic activity.

  • OGUK anticipates that 30,000 direct and indirect jobs could be lost as a result of the pandemic. On 28 April 020 it also reported that UK all exploration and production companies were reporting a worse or significantly worse outlook for 2020, compared to the beginning of the year. Drilling activity could drop to record low levels, falling y up to 50% compared to 2019 levels.

United States

  • Due to the sector’s highly globalized nature, largely dependent on global commodity prices, Mining is expected to be the hardest-hit sector in the US economy as commodity prices fall globally.

  • China is the largest consumer of raw materials due to its large Manufacturing sector. Since the start of the pandemic, manufacturing activity across the globe has contracted sharply. Consequently, demand for many sector products has eroded, exacerbating falling commodity prices and leading to poor sector performance.

  • Since households are confined to their dwellings to combat the spread of coronavirus, air and road travel has declined substantially. Despite lower demand for petroleum products, production of oil and natural gas has remained strong. According to the Energy Information Administration, crude oil inventories grew 19.2 million barrels for the week of April 5. The combination of lower demand and robust production has contributed to the looming fear of overcapacity, pushing oil prices even lower while light natural gas prices declined to record lows.

  • Many oil and gas producers have already begun reducing output to adjust to lower aggregate demand. Overall, the price of West Texas Intermediate crude, a global benchmark for oil pricing, is down approximately 67.3% year-to-date. Representatives from OPEC+ and the G20 group of nations have each pledged to cut production, providing much needed support to crude oil markets.

  • Although demand for many sector products has fallen due to lower manufacturing and business activity, investors have flocked to safe haven assets such as gold and silver to insulate their portfolios from volatile financial markets. Consequently, gold prices have reached seven-year highs, benefiting operators within the Gold and Silver Ore Mining subsector.


Utilities

Utilities COVID-19 Sector Update

Australia

  • According to the ABS, an estimated 34.0% of businesses in the division have experienced adverse effects associated with the COVID-19 virus over the two weeks through April 7. This is lower than the 49.0% reported across the entire economy.

  • A decline in thermal coal prices due to reduced demand is expected to reduce the electricity service price, contributing to a fall in revenue for electricity generators. Additionally, the reduction in fossil fuel input costs is expected to improve the competitiveness of Australia’s fossil fuel electricity generators, slowing the country’s transition towards renewable energy sources.

  • However, the slowdown in Australia’s manufacturing sector is expected to lead to a sharp decline in demand for electricity, limiting any growth in profitability. This decline in demand is unlikely to be outweighed by increased household demand, due to school closures and growth in the number of Australian’s working from home.

  • Companies operating in the Wind and Other Electricity Generation industry and the Solar Electricity Generation industry source a large proportion of their products from overseas. Disruptions to supply chains as a result of the expected slowdown in international trade have the potential to reduce the ability of generators in these industries to carry out planned capacity upgrades, or source parts necessary for maintenance.

  • Large amounts of waste are expected as a result of an increase in usage of personal protective equipment. Much of this waste is expected to consist of single-use plastics, contributing to increased demand for recycling services. This presents an opportunity for operators in the Waste Collection, Treatment and Disposal Subdivision.

  • However, the slowdown in Australia’s manufacturing and retail divisions due to social distancing regulations, are expected to lead to a sharp drop in demand for commercial waste removal services.

 Canada

  • Utilities stocks are up in recent weeks due to investors shifting to safer, less volatile investments.

  • Operators are pressured to stay in business during times of uncertainty, while relief periods are given to residential and business clients ineligible to pay monthly bills.

  • Close cooperation with the World Health Organization is necessary to confirm any new developments on how coronavirus is spread, with water supply and irrigation systems being the most susceptible.

  • Commodity prices, such as natural gas and crude oil, are expected to drop, hindering business operations and its supply chain.

  • With key downstream markets experiencing supply chain disruptions and factory closures, the country’s industrial capacity utilization is expected to drop, a proxy for operators to track demand for services.

Germany

  • As the Utilities sector solely fulfills domestic demand, it is not affected by the COVID-19 pandemic.  

  • Reduced demand for industrial production processes and offices is balanced by increased private demand for electricity due to most white-collar employees working from home. 

New Zealand

  • The expected slowdown of New Zealand’s manufacturing sector is expected to reduce demand for electricity across the country, contributing to the decline in the wholesale price of electricity.

  • Overseas companies supply a significant amount of materials used in the Geothermal, Wind and Other Electricity Generation industry. A slowdown in international trade could reduce the reliability of these supply chains and drive a slowdown in renewable electricity generation.

  • The slowdown in New Zealand’s manufacturing and retail divisions due to government restrictions are expected to lead to a decline in the volume of commercial waste produced. Overall, the net effect of the COVID-19 virus on waste collection services is expected to be negative.  

United Kingdom

  • National Grid has estimated costs of approximately £500 million associated with the slump in electricity use during the coronavirus outbreak. These costs include constraint payments, in which the national grid has had to pay power plants to switch of generating capacity as supply of electricity has exceeded demand in recent weeks.

  • UK electrical power consumption has declined by approximately 29.0% compared with February, with consumption following weekend patterns due to a sharp fall in demand from commercial and industrial sectors.

  • The slowdown in electricity demand helped renewables overtake fossil fuels as the main source of electricity in Great Britain between January and March 2020. Meanwhile, on May 11, National Grid reported that coal had not formed a part of the country’s energy mix since April 10. This is the first coal-free month recorded in the UK since the industrial revolution.

  • According to research from Comparethemarket.com, a surge in usage of household appliances and electronics during lockdown means utility bills could rise by £32.31 per month.

  • Falling electricity demand has caused carbon prices in the EU Emissions Trading Scheme to reach 16-month lows, falling to approximately €16.35 per tonne at March 18. This has reduced the cost of fossil-fuel generation. However, renewable prices are also expected to have declined, owing to the slump in oil prices and lower electricity demand.

  • National Grid has forecast that UK electricity use could drop 20.0% over the summer. The system operator has also warned that record low demand could lead to windfarms and power plants being turned off to avoid overloading the electricity grid.

United States

  • The Utilities sector relies on domestic demand and is therefore not particularly exposed to supply chain disruption caused by COVID-19. However, utilities stocks are up in recent weeks due to investors shifting to safer or less volatile investments.

 


Construction

Construction COVID-19 Sector Update

Australia

  • Shutdowns of nonessential activity do not apply to construction sites. Consequently, these projects are anticipated to continue operations.

  • Weak construction activity in China early in the year has negatively affected demand for minerals. Heavy Industry and Other Non-Building Construction depends heavily on mineral developments, meaning weakening mineral prices can dampen demand. Easing of the lockdown in China is anticipated to somewhat boost demand for minerals as construction and manufacturing activity resumes.

  • Construction relies heavily on labourers who are not able to work from home. Consequently, any reduction in the labour supply due to quarantine requirements among labourers has the potential to delay projects.

  • The Federal Government has identified construction as a sector that can be ramped up to bolster employment and economic activity. Consequently, publicly funded projects such as infrastructure are anticipated to perform well.

  • Weak demand for new commercial and residential buildings is anticipated to negatively affect the product pipelines of firms in the building construction sector

Canada

  • Upstream supply chain issues may restrict construction material availability, hindering sector operations. For example, the Lighting Fixtures Manufacturing industry is heavily reliant on Chinese imports.

  • The sector would benefit from a coronavirus-related interest rate cut by the Bank of Canada.

  • The Canada Mortgage and Housing Corporation’s First-Time Home Buyer Incentive is expected to be affected by coronavirus due to hindered consumer confidence.

  • Projects funded under the Investing in Canada Plan is expected to experience prolonged completion.

  • Nonresidential construction activity is reliant on crude oil prices, with coronavirus posing a threat on global prices.

  • Key commercial downstream markets are expected to experience supply chain disruption, hindering demand for industry services.

Germany

  • Commercial building construction will see a decrease in construction contracts as companies eventually will need to reduce or delay their investment commitments to cope with the financial fallout of the COVID-19 pandemic. It is likely that residential building construction activity will be negatively affected to some extent. 

  • The German construction sector relies heavily on workers from abroad. Recently tightened travel restrictions in most European countries as well as potential upstream supply chain issues may force construction companies to close sites. Reduced capacities in public planning offices and contracting authorities can lead to delays in the execution of tendering procedures. 

New Zealand

  • Construction sites are not required to pause operations at alert level 3, which New Zealand is transitioning into on April 28. Consequently, firms that were unable to operate under Alert Level 4 are anticipated to resume operations.

  • Demand for residential building construction is anticipated to be low, as negative consumer sentiment and declining incomes are discouraging people from seeking new homes. New Zealand exports over 95.0% of its iron ore to China. Consequently, declining construction activity in China is expected to negatively affect heavy industry construction firms that derive demand from mineral developments.

  • Construction is highly labour-intensive, with many construction firms using contract labour. These labourers are generally not compensated for sick leave, and therefore may be less likely to self-quarantine if they have travelled to at-risk areas or are exhibiting symptoms.

United Kingdom

  • As part of updated social distancing measures announced on May 10th, the government has encouraged construction firms that have not reopened since the start of lockdown to return to work. According to Build UK, 86.0% of construction sites in England and Wales were open in the week following this.

  • Construction workers were among those included as the government expanded eligibility criteria for COVID testing on 28th April.

  • The IHS Markit UK Construction PMI fell to 8.2 in April 2020. This represents the steepest contraction in output on record.

  • Building site closures are expected cause the UK to miss out on key housing targets. According to Savills, lockdown measures have bought work on 220,000 new homes to a standstill, undermining the government’s target of 300,000 homes built a year by 2025.

  • Construction output is expected to fall 25.0% in 2020 in a best-case scenario forecasted by the Construction Products Association.

  • Build UK, a leading representative for the UK construction industry, has revealed talks with the Local Government Association to extend permitted working hours for construction sites across the country, in an attempt to enable social distancing on construction sites and to kickstart renewed growth in construction activity.

United States

  • Some construction activity, particularly residential, may be put on hold as economic uncertainty persists. The sector would benefit from an interest rate cut by the Federal Reserve.

  • Upstream supply chain issues may restrict construction material availability, hindering sector operations. For example, the Lighting Fixtures Manufacturing industry is heavily reliant on Chinese imports, which account for 65.0% of domestic demand.


Manufacturing

Manufacturing COVID-19 Sector Update

Australia

  • Global supply chains are still severely restricted. Governments in Australia have now been forced to source goods from domestic manufactures, with overseas manufacturers unable to fulfill orders in the desired timeframe. However, manufacturing activity is slowly ratcheting back up. This is especially the case in China, where Australia sources many of its finished manufactured products, as well as inputs required for local downstream manufacturing.

  • The newly established National COVID-19 Coordination Commission is working with businesses across Australia to better fill gaps in the national manufacturing supply chain.

  • Logistics concerns in China now appear to be over. China recorded record beef imports from Australia of 55,000 tonnes in March. In April, this figure was 23,788, 15.0% higher than the same time last year. Imports from both these months include the forwarding of shipments to China that had been diverted to other nearby countries while their ports were closed.

  • However, demand for beef is still down globally as other governments maintain ongoing lockdowns. Exports to the United States totalled 15,536 tonnes in April, down 28.0% on April 2019. Most Australian beef exported to the US is used in the production of patties for the food-service sector.

  • Cellar door wine sales in Australia have also been severely impacted, as the number of tourists has declined significantly, due to the international and domestic travel restrictions

  • The Chinese Government has yet to announce a lift on live seafood import ban. However, in late March the Australian government announced a $110.0 million air freight assistance package. This will boost the number of flights available for food exporters, including seafood, reopening key channels such as China, Japan and Hong Kong. 500 tonnes of rock lobster have been exported from Perth to China during April. China typically accounts for over 95.0% of demand for Western Australia’s rock lobsters.

  • Since May 11, travel restrictions within certain states have begun to ease. This will boost sales at wineries, breweries and distilleries that are open for takeaway sales

  • Many manufacturing operators either operate manufacturing factories in China or rely on supplies from China. There has been a shortage of supplies for parts or products that are manufactured in China, increasing costs for businesses as they have had to turn to alternative markets. For example, pharmaceutical product manufacturing relies heavily on imports, which are expected to satisfy 72.3% of domestic demand.

  • 2% of domestic demand for medical and surgical equipment is derived from imports. Medcon, the only surgical facemask manufacturer in Australia has now increased its annual production capacity from 2 million to 50 million. Additionally, Detmold, a food packaging manufacturer has announced plans to produce 145 million surgical and respirator masks over the next year.

  • Australian medical device manufacturer ResMed was contracted by the Australian Government to provide 5,500 ventilators for the national stockpile. To date, over 3,000 have been manufactured.

  • A range of nonmedical equipment manufacturers have pivoted to the production of personal protective equipment and ventilators for national and state stockpiles.

  • Generic medicine supplier Arrotex has proposed the creation of a Medicines Manufacturing Future Fund to finance the construction a local facility for the manufacturing of certain pharmaceutical products and ingredients. This would reduce the reliance on overseas countries such as India and China, which have resulted in some shortages during the pandemic.

Canada

  • The Manufacturing sector will be adversely affected by disrupted global supply chains; however, effects will be felt asymmetrically by industry.

  • Most manufacturing subsectors saw increases in trade activity on a month-to-month basis between February and March, but other saw steep decreases, such clothing manufacturing and petroleum and coal products manufacturing.

  • Certain pockets of the sector, including Pharmaceutical and Medicine Manufacturing and Soap, Cleaning Compound, and Toilet Preparation Manufacturing, will continue to experience heightened demand for industry products.

  • Some production facilities in the Motor Vehicle Manufacturing subsector have reopened and a few others are expected to open this week. Motor Vehicle Parts manufacturers have also followed suit. Furthermore, exports on a month-to-month basis between February and March fell for automobile and heavy-duty trucking manufacturing.

  • Nonmedical equipment and supplies manufacturers are also retooling their facilities to assist in the production of medical equipment and supplies such as ventilators and protective masks.

Germany

  • Volkswagen AG, Daimler AG and BMW AG scaled back production. German manufacturers produced 37.0% less in March 2020 compared with 2019.

  • On April 29, Daimler AG announced its results for the first quarter 2020. While vehicle sales dropped by 16.7% compared to Q1 2019, revenue declined by 6.2%. Daimler’s first quarter EBIT dropped by 77.9%, due to production stops and declining sales.

  • As demand decreases and the virus spreads, supply industries suffer. Many small and mid-sized suppliers’ businesses could be threatened, and many upstream companies have cut employee hours to stay solvent or are contemplating taking on loans.

  • Continental AG suffered from decreasing demand of car manufacturers and private households. Revenue in the first quarter of 2020 declined by 10.9% compared to the same period 2019, as the company announced on April 27.

  • China is the largest market export for the German Plastics and Rubber Machinery Manufacturing industry. Decreasing demand from Chinese companies will hinder revenue for manufacturers like KraussMaffei Group GmbH.

  • The steel industry is negatively affected by coronavirus due to China’s presence as the largest steel manufacturing country. In 2018, China produced 51.3% of worldwide crude steel. Steel prices could decline due to less export activity to China. Additionally, almost one-quarter of all German battery imports are sourced from China. As a consequence of the cut back in automotive production, steel companies like ArcelorMittal are panning on cutting back their production.  

  • Many metal producers are observing a severe impact of metal prices changing as a result of changed demand during the pandemic. Copper prices are expected to stay lower in 2020 as opposed to 2019 due to lower demand from important downstream-industries. As a result, the revenue of producers of copper bars, wires and sheets is expected to drop severely. Conversly, the gold price is expected to stay high throughout 2020 due to investor insecurities, which means a higher revenue for gold manufacturers.

  • Extensive layoffs are expected in the steel industry as Thyssenkrupp, one of the largest steel producers in Germany, is closing its production site in Bochum and reducing staff by 3,000. Due to lowered steel production, profits of all steel producing companies are expected to sharply decline.

  • Bottlenecks and production losses could hinder mechanical engineering and chemical-pharmaceutical industries. Demand for these goods is likely to fall significantly in the short-term.

  • Those benefiting from the outbreak include producers of protective gear such as face masks, which play a small role in the German textile market, and metal works companies that may benefit from automotive companies looking for new domestic suppliers.

  • With worsening business sentiment and the widespread shutdown of production sites in key markets, the mechanical engineering industry is likely to experience a sharp decline in revenue. 

  • General textile and clothing manufacturers are experiencing a severe drop in demand, leading some manufacturers, like Trigema, to sew medical protective gear. This effort is expected to somewhat curb revenue losses.

  • Although a vaccine or medication for the novel coronavirus does not yet exist, demand for pharmaceuticals is rising, such as antibiotics to treat associated infections.

  • COVID-19 seems to promise future growth in pharmaceuticals due to intensive research for a vaccine. The global search for a vaccine, however, exacerbates external competition.

  • In contrast to other recession periods shipping lines don’t use the stagnation to carry out MRO works. Therefore, there will also be a huge sales decline in the shipping MRO industry.

New Zealand

  • As the manufacturing industry in China gradually normalizes, manufacturing firms in NZ will see an improvement in supply chain operations.

  • According to the Central Government, approximately 70.0% of manufacturing export businesses were shut down during the Alert Level 4 lockdown.

  • New Zealand’s exports have taken a major hit, with everything from timber to meat and fruit processing facing delays and cancellations.

  • The New Zealand Government laid out $3 billion in infrastructure spending in its 2020 Budget. This will benefit product manufacturers whose downstream markets include the construction sector.

  • The temporary closures of food service stores impacted food consumption, including meat, dairy and seafood. This resulted in an excess domestic supply of some of these products and reduced domestic prices, leading to lower returns and slimmer profit margins.

  • With ports in China coming back to full capacity as the wider economy opened back up, imports increased significantly, benefiting meat processors, with 15,700 tonnes of New Zealand beef exports reaching China’s shores in March. However, some of this is likely from shipments that had been initially redirected to other countries such as Singapore and South Korea.

  • Some businesses are reshoring their manufacturing operations back to New Zealand to combat supply chain disruptions. This includes the New Zealand Sock Company, has begun manufacturing socks and merino wool masks locally.

  • Alert 4 measures were relaxed on April 28 as New Zealand entered Alert Level 3, and butchers will again be able to trade. Food-service establishments are also able to sell takeaway meals.

  • These measures are set to change again on May 14, when the country enters Alert Level 2. Cafes and restaurants will be able to open, boosting demand substantially for food and beverage manufacturers. Bars will be able to open from May 21, but all patrons must be seated.

United Kingdom

  • Manufacturing employees are among those being actively encouraged to return to work under new social distancing guidelines

  • Major aerospace manufacturer Rolls Royce has announced that it is to cut 9,000 jobs as a result of the coronavirus. Meanwhile, UK supercar maker McLaren also plans to cut more than a quarter of its 4,000-strong workforce.

  • The latest CBI Industrial Trends Survey reported a 21% decline in output volumes for the three months to April 2020. This was the fastest pace of decline since August 2009, with output dropping in 13 out of 17 subsectors. Manufacturers expect output to decline 67.0% in the three months to July 2020, the weakest output expectations since the CBI started collating survey data in 1958.

  • The IHS Markit UK Manufacturing PMI was revised lower to 32.6 in April 2020, from a preliminary estimate of 32.9. This represents the steepest month of contraction in the sector since 1992. Additionally, according to data from the European Commission, capacity utilisation in factories

  • Every major carmaker in the UK is suspending or cutting production as a result of the disruption. This includes Vauxhall owner Peugeot, Nissan, Honda, BMW and Toyota. The Society of Motor Manufacturers and Traders estimates that this will cause an 18.0% drop in UK car production in 2020 compared with 2019.

  • Carmakers have enacted planned-emergency Brexit measures to increase warehousing and storage for parts still arriving from suppliers, which were ordered several weeks ago.

United States

  • Sharp declines in consumer demand will adversely affect the US Manufacturing industry.

  • Some durable goods manufacturers are idling production to curb losses.

  • Manufacturers of nondurable goods are expected to sustain or grow sales in the coming months. In particular, manufacturers of consumer nondiscretionary items such as toilet paper, food and household products are expected to see a spike in sales resulting from panic shopping.

  • The largest economic blow to the Manufacturing sector is from the Computer and Electronic Products Manufacturing subsector.

  • The Chemical Manufacturing subsector is the largest overall contributor to US Manufacturing GDP, accounting for an estimated 15.9%. The subsector is expected to be adversely impacted by a global decline in industrial activity caused by coronavirus. However, certain segments of the subsector, including pharmaceuticals and soaps manufacturing, will experience heightened demand.

  • Industry clusters at risk include: Basic Chemical Manufacturing; Resin, Synthetic Rubber & Artificial and Synthetic Fibers and Filaments Manufacturing; and Paint, Coating & Adhesive Manufacturing.

  • The Medical Equipment & Supplies Manufacturing cluster is expected to see a strong surge in demand from medical care providers and consumers. In particular, manufacturers of PPE are running at full capacity as the US government seeks to allay supply concerns. This industry cluster falls under the Miscellaneous Manufacturing subsector, which accounts for an estimated 4.4% of US Manufacturing GDP. On balance, manufacturers of medical supplies and personal protective equipment will stand out as a major outlier of growth within the broader sector.


Wholesale Trade

Wholesale Trade COVID-19 Sector Update

Australia

  • Lower shopping activity as a result of shutdowns of nonessential activity is anticipated to negatively affect demand for consumer goods wholesaling from the retail sector. However, the easing of shutdown restrictions over the next 12 weeks is expected to boost demand from the retail sector as consumers return to shops.

  • Wholesalers can be negatively affected by reduced production of goods in affected countries. For example, Textile Product Wholesaling and Clothing Wholesaling firms source a significant proportion of their products from China. Difficulty obtaining goods or needing to source them from countries with higher production costs can dampen demand for wholesalers.

  • Machinery and equipment wholesalers, especially Mining and Industrial Machinery Wholesaling firms, are exposed to demand from mineral developments. Reduced construction activity in China over the first several months of the outbreak has weakened demand for minerals such as iron.

  • Consumer stockpiling activity early in the outbreak is expected to have boosted demand for the Grocery, Liquor and Tobacco Product Wholesaling subdivision in the short-term. However, this is anticipated to diminish as shutdown restrictions ease.

  • The need for medical supplies and scientific equipment to study the virus is anticipated to support demand for Medical and Scientific Equipment Wholesaling firms. However, firms in this sector may also be negatively affected by declining activity in other areas of medicine depending on the type of products they wholesale.

  • Foreign metal and mineral buyers represent 51.2% of the Metal and Mineral Wholesaling industry’s market. Declining construction activity in affected areas, such as China in the first several months of the outbreak, has negatively affected demand from this market.

  • Retailers are not currently restricted from operating in Australia. Consequently, demand for consumer goods wholesaling firms is expected to be strongly negatively affected by reduced shopping activity, but not forced to cease or pause operations entirely.

Canada

  • The sector will likely experience setbacks mirroring those affecting the Manufacturing sector. Industries that import many of their products from abroad will experience a heightened risk. 

  • Wholesaling subsectors with above-average supplier risk resulting from the coronavirus include Auto Parts Wholesaling Footwear Wholesaling and Chemical Wholesaling.

  • Certain pockets of the sector, including wholesaling of pharmaceutical and medicine supplies and wholesaling of soap, cleaning compound, and toilet preparation, and wholesaling of food products, will likely experience heightened demand for industry products.

  • As many Canadian and global manufacturers temporary close their plants, many wholesalers have followed suit as demand slows. This is expected to lead to many employees being laid off or furloughed.

Germany

  • When food and household goods retailers ran low on certain goods like paper towels and canned food in March, several wholesale traders decided to temporarily open their doors to private consumers, some even delivering directly to them. IBISWorld expects some wholesale traders to remain direct retailers for consumers, thus reinforcing the tendency of bypassing wholesale trade.

  • Wholesale traders whose downstream industries are mainly nonessential retail traders were experiencing a severe drop in demand during March and April. Demand from nonessential retail stores is expected to stay low in the month of May despite stores being allowed to open again.

New Zealand

  • Shopping activity is anticipated to increase but remain weak under Alert Level 3, somewhat boosting demand for wholesalers from retailers.

  • Wholesalers that source their products from affected areas are exposed to reduced availability. Difficulty sourcing products or higher prices negatively affects demand for wholesalers. For example, many operators in the Clothing and Footwear Wholesaling industry in New Zealand source products from overseas.

  • New Zealand exports over 90.0% of its iron ore to China. Weakening mineral markets as a result of reduced construction activity in China negatively affect mining activity in New Zealand, and therefore negatively affect demand for Industrial and Mining Machinery Wholesaling. This trend is anticipated to ease as Chinese manufacturing and construction activity resumes.

  • Declining demand for mineral exports to China due to reduced construction activity negatively affects Metal and Mineral Wholesaling firms. Foreign metal and mineral buyers account for 20.7% of this industry’s market.

  • Rising demand for nonperishable groceries due to consumer stockpiling boosts demand for Soft Drink and Pre-Packaged Food Wholesaling industry firms. In addition, higher demand for other grocery products such as fresh food and meat are anticipated to boost demand for food wholesalers, as consumers must now eat in the home.

United Kingdom

  • Wholesalers of some consumer goods will likely experience decreases in demand due to the shutdown of nonessential stores. The closure of clothing shops means that suppliers could face a large quantity of inventory unsold. However, the government announced that all non-essential retailers can reopen in England from 15 June, while outdoor markets and car showrooms can reopen from 1 June. This would provide some boost for the wholesale trade sector.

  • Food and grocery supply wholesalers have experienced an increase in demand; however, this boost has not been enough to outweigh the drop in spending elsewhere. Some UK food wholesalers, such as Bidfood, which is one of the largest fresh and chilled food suppliers to the catering industry, have set up operations to sell directly to consumers as revenue from restaurant and catering customers has plummeted.

  • SMMT reports that only 4,321 new cars were registered in April, with sales suffering 97% drop from April 2019. This is due to closed dealerships and disrupted production lines. Its adjusted prediction for new car registrations in 2020 is down to 1.68 million, a large decline on the 2.3 million cars sold in 2019.

  • Jaguar Land Rover has restarted some production as of May 18 to produce limited numbers of its most lucrative models to be sold to buyers in China as it comes out of lockdown. Aston Martin is also reopening a factory in Wales in May.

  • The easing of restrictions from May 13 can aid wholesalers, as many manufacturers restart operations. Carmakers, Bentley and Toyota, are starting up again, with workers returning to sites.

United States

  • The Wholesale Trade sector is expected to experience setbacks mirroring those within the Manufacturing sector as demand continues to contract in 2020. Furthermore, the sector is anticipated to experience increased supplier risk while contending with tempered downstream demand for most downstream buyers. However, suppliers for businesses deemed essential are anticipated to benefit.

  • Subsectors with above-average supplier risk resulting from coronavirus include Metal and Mineral (except Petroleum) Merchant Wholesalers, Professional and Commercial Equipment and Supplies Merchant Wholesalers, Chemical and Allied Products Merchant Wholesalers and Automobile Wholesalers.

  • Grocery, medical supplies, laboratory supply and other essential supply wholesalers are expected to contend with surging downstream demand. Along with many other sector operators, General Motors Company and Ford Motor company have shut down some North America manufacturing and warehousing facilities for nonessential product manufacturing, further contributing to sector setbacks. Additionally, Drug, Cosmetic and Toiletry Wholesalers are at increased supplier risk as upstream Soap and Cleaning Compound Manufacturers have limited supply of cleaning compounds and disinfectants needed to make industry products, since most of the raw chemicals come from China.

  • Demand from essential businesses in foodservice and medical fields is expected to support the sector. The sector’s three largest companies, McKesson Corporation, AmerisourceBergen Corporation and Cardinal Health Inc., have benefited from the surge in global demand for medical supplies. As hospitals become less overwhelmed by the increase in COVID-19 patients and as the medical supply chain adjusts to the pandemic, medical supplies wholesalers have somewhat mitigated stress.

  • Despite strong demand from food service ang grocery stores, Egg and Poultry Wholesalers and Beef and Pork Wholesalers are at an increased risk. Tyson Foods, a key upstream producer of meat, is anticipating a severe disruption in the food supply chain as the company’s facilities, among others, close due to regional coronavirus outbreaks. As these processing facilities shut down, many farmers have contended with limited buyers of livestock. Consequently, my farmers will have to depopulate farms, thus causing meat shortages However, President Trump has ordered meatpacking plants to remain open under the Defense Production Act, which will prevent any lasting shortages in the supply chain.


Retail Trade

Retail Trade COVID-19 Sector Update

Australia

  • Fuel prices are projected to decline moderately in response to decreased demand for oil from international manufacturers. Declining air travel has decreased oil consumption significantly over the past three months. As a result of weaker demand and an oversupply of crude oil, retail fuel prices have been declining. This is expected to reduce revenue but have little effect on profit. Over 55.0% of refined petroleum sold in Australia is imported.

  • Chinese, United States of America and Germany products make up over 50.0% of the value of imported motor vehicle parts. The temporary closure of many Chinese manufacturers due to outbreak of COVID-19 is expected to disrupt the Motor Vehicle Parts Retailing supply chain in the short-term. Additionally, many United States and European motor vehicle and parts manufacturers have temporarily shut down production. Disrupted supply lines could potentially raise the price of after-market components.

  • A significant proportion of electronics products retailed in Australia are imported from China. Therefore, supply is likely to be affected among industries such as Computer and Software Retailing, Domestic Appliance Retailing and Electrical and Lighting Stores.

  • Food retailing industries are expected to be moderately affected by COVID-19, but report minimal overall change in revenue growth. The outbreak is expected to disrupt supply lines and decrease demand for meat and produce from overseas, resulting in stock being diverted to the domestic market. This is expected to slightly decrease food retail prices, unless retailers do not pass on the decline in costs to consumers. Furthermore, in March 2020, according to the ABS, consumer expenditure at supermarkets and grocery stores rose by 22.4%. This was primarily due to the surge in demand from consumer stockpiling of staple goods. In April, major player, Coles, announced that demand conditions have almost returned to those prior to COVID-19

  • On May 8, the Federal Government announced a 3-Step Framework for loosening COVID-19 restrictions which is expected to be fully executed by the State Governments by July 2020. The First step will allow for retail stores to open with store managers implementing a COVIDSafe plan to keep consumers safe. Although not all states are expected to implement this framework straight away, it provides a loose timeframe of when restrictions will be lifted. As a result, retail sales are anticipated to rebound once states begin to loosen restrictions.

Canada

  • The Hobby, Toy & Game Stores industry among other retail industries including clothing stores and furniture stores are expected to experience significant supply chain disruption since suppliers are heavily dependent on Chinese imports.

  • Prime Minister Justin Trudeau has announced a spending package, which includes a wage subsidy for small businesses and the ability to defer tax payments until August, to help Canadian residents and businesses through the outbreak.

  • Grocery stores and big box retailers are to stay open and are expected to see increases in sales as consumer stock up. Furthermore, Walmart Canada announced a plan to hire 10,000 workers to keep stores open during the pandemic. It also implemented a system in which the first hour of opening is reserved for senior citizens and people with disabilities. Many grocery stores have implemented the same policy.

  • Many retailers have laid off employees as they close their doors and wait out the pandemic. Some larger retailers have agreed to pay their staffs for their scheduled shifts up until certain dates even after temporarily closing.

  • The Canadian government announced the first phase of the COVID-19 Economic Response Plan on March 18. The goal of the plan is to stabilize the economy and support individuals, businesses, and industries experiencing hardships as a result of the global COVID-19 Outbreak. These measures will provide up to $27.0 billion in direct support of workers and businesses, and $55.0 billion to meet liquidity needs of Canadian businesses and households through tax deferrals. Therefore, to a combined $82.0 billion. Some industries were specifically highlighted for support in the Economic Response Plan, including food producers, airports, broadcasters, tourism operators, and Northern Air Carriers.

  • On April 16, the government announced additional support for small businesses including new measures that help businesses stay open and their workers employed. Included in these measures are expanding the Canada Emergency Business Account to businesses that paid between $20,000 and $1.5 million in total payroll in 2019. The program was previously available to businesses with payrolls between $50,000 and $1.0 million. Second, the government intends to premiere the Canada Emergency Commercial Rent Assistance program for small businesses. The program is expected to provide loans to commercial property owners who in turn will lower or forgo the rent of small businesses for the months of April, May, and June. The government would have to collaborate with provinces to introduce the program.

Germany

  • To keep retailers solvent, the German federal government is issuing aids totaling €50.0 billion for smaller companies with up to 10 employees. Several states are even issuing aids for companies of up to 50, 100 or 250 employees. Additionally, the federal government is issuing loans of up to three months’ worth of revenue for middle sized companies with 11 to 250 employees and offering delays in tax payments for all affected companies until 2021. Nevertheless, nonessential retail stores are already expecting tremendous revenue losses for 2020.

New Zealand

  • Retail petrol prices are projected to decline as a result of the COVID-19 outbreak. A decline in demand for oil globally, particularly from its manufacturing sector, is expected to place strong downward pressure on oil prices, with a slight lag in flow-through to retail prices. Furthermore, travel bans and restrictions have decreased fuel consumption from airlines over the past four months, putting further downward pressure on prices.

  • In April, crude oil prices dipped into negative prices due to lack of storage capacities. Mining businesses at full capacity have had to sell oil at negative prices as they have nowhere to store it. This is expected to push retail petrol prices down further in the short-term.

  • Disrupted supply lines and a decrease in manufacturing output may result in shortages of some electronics. Retailed price rises are expected to be modest. Competitors are likely to boost production in cases of supply shortfalls from Chinese firms, which would represent an opportunity to gain market share.

  • The Liquor Retailing industry is likely to report a slight decline in prices based on weaker international demand, but could see available supply rise significantly should the COVID-19 outbreak fail to be contained.

  • The New Zealand Government has announced a stimulus package which is expected to support the Retail Trade division. In particular, the package will offer $5.1 billion in wage subsidies for affected businesses and $2.8 billion income support package for the most vulnerable citizens.

  • On April 15, the Central Government announced further measures to support small and medium-sized businesses. These new measures continue to focus on cashflow and business confidence. The new relief measures include greater flexibility to affected businesses to meet tax obligations, a $3.1 billion tax loss carry-back scheme and $60.0 million in annual savings to businesses each year due to changes to tax loss continuity rules. This is expected increase cashflows to affected retail businesses and allow them to continue to meet mounting fixed costs, such as rent.

  • On 14 May 2020, the Central Government unveiled a $50 billion COVID-19 Response and Recovery Fund (CRRF), which builds on the previous fiscal stimulus package. Major initiatives include an additional $3 billion to be used on the wage subsidy scheme and $400 million to support tourism. This is expected to provide relief to affected retail businesses and support the retention of employees.

United Kingdom

  • Despite a surge in online shopping as people stayed at home and non-essential stores were shut, the volume of retail sales fell 18.1% in April compared to March, and 22.6% compared to the same month in the previous year, according to the ONS. Household goods, fuel sales and clothing were the worst performing categories with the first two falling 52.0%, and the latter declining 50.2% compared to the previous month. Spending on food also dropped 4% after the surge of panic buying in March.

  • All non-essential retail establishments are set to open from 15 June 2020 although social distancing measures will remain in place. This includes staggering shifts and keep employees apart, plastic screens and continuing enforcing 2.0 metre distancing rules, as well as discouraging consumers from touching goods while browsing. Every company with more than five staff is already obliged to produce a risk assessment that is kept regularly updated.

  • When stores start to reopen, retailers are likely to see a flurry of refunds and exchanges as consumer seek to reclaim money on goods such as holiday clothing, rendered redundant by lockdown measures. This is anticipated to further aggravate excess inventory, discounting and adversely affect margins.

  • COVID-19 is likely to have a longer-term impact on the retail sector. Stores are likely to see less footfall and greater reliance on e-commerce. Retailers will be forced to adapt faster than they normally would; entering partnership to access technology or utilise spare capacity. Meanwhile, 79% of UK retail landlords say the pandemic permanently changes leasing terms and increased use of data regarding footfall, trading turnover and how physical shops help to generate online sales are set to become new key metrics which influence the pricing of leases.

  • Although for some, COVID-19 will also mean store closures and redundancies, particularly as government support schemes start to fade. With empty stores, the sector is likely to see repurpose or redevelopment of establishments into restaurants, cafes or potentially commercial and residential spaces.

United States

  • Food and beverage stores and health and personal care stores are expected to see strong increases in sales as consumers stock up on PPE and food due to state lockdowns and restrictions. 

  • The retail clothing industry is expected to experience massive job losses and drops in sales. As a result, some of the largest industry operators are asking for federal aid to stay afloat during the course of the pandemic.


Transportation and Warehousing

Transportation & Warehousing COVID-19 Sector Update

Australia

  • Operators in the Transport, Postal and Warehouse Division generate significant revenue from transporting products to and from Australia’s exports markets. The WTO estimated that global trade will contract by up to one third across the course of the pandemic. Consequently, Australia’s domestic freight task is expected to contract significantly in the current year, leading to a decline in division revenue.

  • Logistics and freight transport services are considered essential and are expected to face minimal disruption from travel restrictions. Operators that provide freight services to downstream customers affected by these restrictions are expected to face a sharp downturn in demand, due to the expected decline in international trade and economic activity.

  • On April 2, the Federal Government announced a $110.0 million initiative to increase agricultural exports by air. This initiative is expected to limit the decline in demand for air freight in the current year.

  • The pandemic is expected to have a weakening effect on international and domestic demand for air passenger transport. Demand for international airlines has contracted significantly, with Qantas and Virgin substantially reducing their scheduled flights. Virgin Australia entered voluntary administration on April 21 due to its poor financial position.

  • On April 16, the Federal Government announced a $165.0 million support package for Qantas and Virgin to operate domestic flights between Australia’s capital cities, and regional centres. This support aims to allow Australians who have recently arrived from overseas to return to their home state, and is expected to have minimal influence on division revenue.

  • The easing of restrictions in some states and territories on May 11 is expected to improve demand for subdivision services.

  • The easing of social distancing restrictions from May 11 are expected to lead to increased business activity, increasing demand for passenger transport services.

Canada

  • Air transportation is being significantly impacted, with massive layoffs as travel is restricted. Air Canada has suspended a majority of its international up until at least May 31th. Furthermore, all flights to the United States have been suspended until at least May 22nd. Air Canada has also shifted to cargo-only flights by converting passenger cabins in their fleet to free up more space for freight.

  • The Scenic and Sightseeing Transportation subsector will continue to see a slump in revenue due to a near shutdown of tourism from international tourists.

  • Public transportation is experiencing much lower than normal passenger volumes. According to Statistics Canada, Toronto and Montreal transit agencies have already reported ridership declines in excess of 70% by the middle of March. This is due to more people working from home as well as cancellation of social events and reduced nonessential travel. Public transportation agencies will most likely need government assistance to continue operating.

  • While more consumers may take advantage of online shopping due to social distancing, consumer spending will almost certainly decline. Thus, freight volumes are expected to decrease, which will lower revenues for industries that support the transportation sector.

Germany

  • Deutsche Bahn AG, which holds 84.0% of the Intercity Passenger Rail transport market, announced its plan to compensate passengers if their trip is canceled due to the virus.

  • Due to cancellation of passenger air transport, cargo airlines face severe capacity shortages leading to higher prices for air freight. Lufthansa and Condor use their passenger aircrafts to create additional cargo capacity and meet rising demand. This puts logistical pressure onto forwarding companies. Plus, lead times are expected to lengthen.

  • LOT Polish Airlines’ acquisition of Condor, Germany’s second-largest airline company, was cancelled.

  • TUI, the world’s largest tour operator, received a €1.8 billion loan from state-owned KfW bank.

  • The four ocean cruise lines in Germany have ceased their operations until the end of June 2020.

  • Only about 5.0% of scheduled passenger flights currently depart from German airports.  In mid-June 2020 operations are expected to increase.

  • Lufthansa has settled an agreement for a €9.0 billion government loan, with federal government as a new 20.0% shareholder. The agreement still needs to be approved by various shareholders

  • Inland water freight shipping industry experiences a double dip as low water phases and COVID-19 demand shock will lead to many bankruptcies.

  • Storage industry will only suffer a short period decline in sales as booming e-commerce stabilizes the business.

New Zealand

  • Operators in the Transport, Postal and Warehousing Division generate a significant proportion of their revenue transporting products to and from export markets. The WTO estimates that international trade may contract by up to one third globally over the course of the pandemic. A contraction of this scale in New Zealand's international trade will have a severe impact on revenue for companies operating across this sector.

  • Demand for air transport, as well as other forms of passenger transport, is expected to decline due to government regulations limiting nonessential activities.

  • Growth in the number of New Zealanders working remotely has contributed to a sharp drop in demand for passenger transport services, including bus, rail and taxi services. However, loosening restrictions are expected to lead to increased demand for many of these services.

  • In May 2020, the New Zealand Government released their budget for the 2020-21 financial year. This budget included an increase of $1.1 billion in the country’s rail and ferry transport infrastructure. This investment includes an increase in funding for rail track maintenance and upgrade, as well as for the upgrade of locomotives and ferries. This investment is expected to improve the competitiveness of the rail freight transport industry over the road freight transport industry and aid the recovery of operators.

  • Despite this expected revenue decline, any decline in industry employment is expected to be largely limited, due to the Central Government’s Wage Subsidy programme. Under this scheme, operators will receive up to $585.80 per employees, to be paid towards wages.

United Kingdom

  • The current guidance issued by the FCO advises British people against all nonessential international travel as of April 4.

  • The government has announced that people arriving in the UK must self-isolate for 14 days from June 8, 2020.

  • As of May 11, 30,000 Britons have returned to the UK via 141 chartered flights since the pandemic struck.

  • Virgin Atlantic has announced that it is to cut 3,000 jobs in the UK and end its operation at Gatwick airport as a result of COVID-19. Meanwhile, British Airways has announced plans to make 12,000 of its staff redundant due to the global collapse in air travel, as parent company International Airlines Group (IAG), announced a €1.7bn (£1.5bn) loss after tax during the first quarter, compared with a profit of €70m in 2019.

  • Heathrow airport passenger traffic fell by 97.0% year-on-year to 206,000 people in April 2020.

  • The UK’s Airport Operators Association has said that its members have furloughed between 50.0% and 80.0% of their staff.

  • As of May 21, transport use for all motor vehicles in the UK has fallen by 41.0% since the first week of February. Meanwhile, rail and tube travel has fallen by 95.0% and 93.0% respectively, compared with the equivalent day in 2019. In response to this, the government has suspended all rail franchise agreements, with all fares paid to the government, who will in turn take on the financial risk of running the network. The government has also ensured that bus services will receive a £400.0 million bailout to ensure that bus services can keep running amid falling revenue and profit, as well as guaranteeing a further £200.0 million of planned investments. Transport for London has also received a £1.6 billion bailout in order to ensure that services can be maintained.

  • The UK Warehousing Association has warned that Britain’s warehouses are likely to reach capacity by early May.

United States

  • As COVID-19 reduces manufacturing output and consumer confidence alike, demand from most commercial sectors will be reduced.

  • Overcapacity, caused by lower demand from industries across the sector, is expected to reduce average profit margins in 2020.

  • The Scenic and Sightseeing Transportation subsector will likely see a slump in revenue due to fewer international and domestic tourists. Declines in consumer demand for industry services may well continue through 2020 and beyond, as health concerns persist. Consumers account for more than 25.0% of sector revenue, so continued declines in demand will be highly consequential for revenue and profitability.

  • Air transportation, historically the second-largest subsector, is experiencing strong declines in passenger demand. This subsector accounted for 16.3% of total sector revenue in 2019 but is expected to decline to less than 15.0% in 2020, as flights and travel plans, both domestically and abroad, are canceled or postponed.

  • Similar to air travel, passenger demand for cruises in 2020 has plummeted as a result of the outbreak. The US is by far the largest market for cruises and has consequently been impacted significantly.

  • Truck transportation, which is the largest employer in the sector, will experience reduced demand for services as global supply chains are disrupted.

  • Excessive oil price volatility occurring this year is also likely to impact revenue and operating conditions. Truck transportation accounted for 28.1% of sector revenue in 2019.

  • Trucking industries are particularly fragmented and smaller operators, often single nonemployers, demonstrate thin profit margins. The average age of truck drivers in the United States is over 55, which may emphasize the impact of the virus as a greater portion of drivers pause or reduce their services.


Information

Information COVID-19 Sector Update

Australia

  • According to the ABS, nearly 80.0% of businesses in the division expect the COVID-19 outbreak to have an adverse effect on demand for their goods and services over the two months from April 2020. This proportion is higher than the 69.0% average across the economy.

  • Deteriorating economic conditions caused by the COVID-19 outbreak have significantly reduced demand for advertising space, which has negatively affected publishers and broadcasters. Some of Australia’s major media companies have reported advertising revenue falling by up to 50.0% as a result of COVID-19.

  • The COVID-19 outbreak has had a significant effect on regional media. News Corp Australia suspended print publication of 60 of its community newspapers in April 2020 citing falling advertising revenue. Regional media publisher Australian Community Media also closed some of its printing sites and suspended print publication of its nondaily titles in April 2020 due to the drop in advertising revenue. In response, the Federal Government announced a $50.0 million package to support public interest journalism across TV, newspapers and radio in regional Australia.

  • Film and TV production activity has largely been halted by COVID-19, with at least 60 shoots shutting down indefinitely. However, relaxed restrictions on movement and gathering are anticipated to allow some productions to resume soon. Fremantle Australia resumed production of its soap opera franchise Neighbours in late April 2020.

  • Falling advertising revenue has also affected TV broadcasters, particularly as sporting leagues and events have been postponed or cancelled due to COVID-19. These trends have affected both free-to-air and pay-TV broadcasters. In response, the Federal Government has suspended local content quotas for both free-to-air and pay-TV broadcasters through the end of 2020, with the option to extend the suspension through 2021. This suspension is expected to reduce demand for locally produced film and TV content.

  • Firms in the Internet Publishing and Broadcasting industry, such as subscription video-on-demand services, will likely benefit from increased demand as more Australians stay at home due to greater restrictions on social gatherings and activities. SVOD operator Netflix has doubled its subscriber forecast for Australia in the wake of COVID-19 as individuals spend more time at home.

  • Software publishers that develop business software that enables employees to coordinate and work remotely, such as Atlassian, are anticipated to benefit from increased demand as more businesses operate remotely.

Canada

  • Canada’s Information sector is not expected to be significantly affected by the coronavirus pandemic, chiefly due to the sector’s enduring reliance on domestic demand, low probability of supply chain disruption and its importance in disseminating data to companies and individuals alike, often in times of crisis.

  • Canada’s motion picture and sound recording subsector, however, is expected to experience a decrease in revenue in at least the short run due to many film and television shoots pausing their production activities in the wake of the virus. For instance, the City of Toronto reported that of 16 films and TV series shooting in the city the week of March 9, at least six decided to suspend production as a preventative public health measure. According to the same source, production investments in film, TV and other digital media contributed nearly $2.0 billion to the local economy in 2018 (latest data available).

Germany

  • Over the course of the third week of March, many companies shifted their operations to remote employment. This has led to an increase in the use of cloud-based software such as Microsoft Teams, Skype for Business and Google’s G Suite. Additional demand for this type of software might come from schools, which have been closed in all of Germany as of March 17. IT companies and consultants are working hard to meet the increase in demand. However, this software has been temporarily offered for free by companies such as Microsoft and Google, which is why an increase in revenue for such services is only expected in the medium-term.

  • Cinemas, libraries and similar public venues have been closed in all of Germany as of March 18, but are planned to be re-opened in mid-May. Significant revenue losses have already been experienced since visitor numbers are usually higher in the colder months and movie releases have been postponed. After re-opening, visitor numbers are expected to stay low, not only because of the warmer summer months with more outside activity options but also because of social distancing and hygiene rules that still have to be upheld. Upstream industries such as movie production and dubbing are likely affected.

  • Media outlets experience a significant increase in demand and have increased hours for their employees to offer information in very short periods of time. Revenue for 2020 is expected to increase drastically.

New Zealand

  • The COVID-19 outbreak and resulting economic disruption has significantly affected advertising revenue for media outlets. Bauer Media has closed its New Zealand magazine business due to the COVID-19 outbreak, citing a sharp decline in advertising revenue. New Zealand Media and Entertainment (NZME) has closed its Radio Sport station as global sport has been suspended due to the COVID-19 outbreak. NZME has subsequently cut 200 jobs and reduced salaries due to falling advertising revenue, which the company expects to be 50% lower than that recorded in April 2019.

  • In late April 2020, the New Zealand Government announced a $50.0 million support package for media companies. The package includes funds to cover commercial broadcasters’ transmission fees and their contribution to shows funded by New Zealand on Air. The package also sets aside $11.0 million in support for assistance to specific companies as needed. Another support package is expected when the government announces its next budget.

  • The restrictions on activity and movement have significantly affected demand for film and video production and post-production services, with many productions suspended or delayed due to the COVID-19 outbreak. Although some post-production activities have been able to continue under the Alert Level 4 and Alert Level 3 restrictions, demand is expected to decline over the medium term as production activities largely remain suspended. More production activity is anticipated to resume following the move to Alert Level 2 restrictions on 14 May.

  • Wireless telecommunication network operators have also reported declines in revenue as a result of the COVID-19 outbreak. Restrictions on international travel have eliminated revenue derived from international visitors and New Zealanders roaming overseas. In addition, the Alert Level 4 restrictions significantly affected retail sales of mobile phones and plans. Telecommunications retail outlets will be able to reopen under the Alert Level 2 restrictions from 14 May.

United Kingdom

  • Public interest in government news briefings is expected to support demand for media outlets’ services. Online publishers and broadcasters are seeing a surge in demand. Software publishers may also benefit as people work remotely.

  • Public venues including cinemas and libraries are expected to suffer as they have remained closed during the lockdown. Low consumer confidence and health worries are likely to further disrupt operators in those industries once they eventually reopen.

  • Due to social distancing measures and stay-at-home orders, people are having to work from home, significantly boosting demand for remote teleconferencing, such as Zoom and Microsoft Teams, and other ICT services.

  • According to an EY survey of 2,000 UK consumers at the start of April, 35% are making more mobile phone calls, to the benefit or telecommunication carriers.

  • UK national newspaper sales have plunged since the lockdown, with thousands of independent newsagents having closed. The Reuters Institute at the University of Oxford warned that the economic effects of coronavirus could potentially remove 10.0% of all frontline journalism jobs in the UK. However, the lockdown has caused a shift to people accessing news publishers online. 

United States

  • Publishing, broadcasting and telecommunications subsectors may see a moderate increase in sales given greater demand for coronavirus-related news. These subsectors account for an estimated 65.4% of sector GDP.

  • The rapid increase in remote working and the impact of social distancing requirements are likely to require increased usage of telecom services and data storage services, which is likely to benefit industry operators within telecommunication industries in this sector.

  • Conversely, industries that rely on in-person patronage, such as the Movie Theaters industry, are likely to suffer.

  • Operators that provide telecommunications and data hosting services may face additional strain on the capacity of their infrastructure due to increased usage, particularly those in the Internet Service Providers industry and the Wireless Telecommunication Carriers industry.


Finance and Insurance

Finance & Insurance COVID-19 Sector Update

Australia

  • Financial asset investors have shifted a large amount of funds into fixed-income assets and funds and other safe-haven assets like gold, the US dollar and US Treasuries. As investment income is a key revenue component for insurers, volatility in global equity market could affect insurers’ investment revenue over the short-term.

  • Revenue growth for the Travel Insurance industry in Australia has been adjusted from an increase of 2.4% to 0.3% increase in 2019-20 due to the COVID-19 outbreak. General insurers that provide business and commercial insurance offer business interruption (BI). However, many standard BI policies may not provide cover for claims related to COVID-19 and businesses could find it difficult to make claims, especially exclusions may include diseases and viruses and claims are often related to property damage or physical loss.

  • Life insurers and reinsurers face the risk of a pandemic and are often more exposed to mortality and morbidity risks according to AM Best.

  • Banks have offered mortgage relief for customers who lose their jobs, including reducing interest rates and granting deferrals on repayments of up to three months. These institutions have offered relief for small businesses, announcing deferrals on loans for up to six months.

  • On March 30, the Australian Banking Association announced on that the banks had lifted the threshold for businesses to be eligible for this loan relief from $3.0 million in loan facilities to $10.0 million. Consequently, loan relief will now apply to $250.0 billion worth of loans.

  • National Bank Australia, NAB, launched a $3.5 billion capital raising after its cash earnings fell by 51.4%. Banks are expected to release their half year profit result on May 7.

  • ANZ and Westpac have also reported slumps in profit due to provisions for COVID-19 related losses.

Canada

  • Canada’s six largest banks are allowing the deferral of mortgage payments up to six months.

  • The Bank of Canada has the overnight rate target at 0.25% as of May 12th. This has reduced expectations of revenue growth among banks as the net interest margin tightens and lending activity is expected to decline.

  • Loan losses are expected to increase as businesses and individuals are put under more financial duress. This is particularly true for lenders with relatively high levels of their loan portfolio in the oil and gas sector, which saw a steep decline in the price of oil recently.

  • The government, through the Canada Mortgage and Housing Corporation (CMHC), has launched an Insured Mortgage Purchase Program. By the government purchasing up to $50 billion of insured mortgage pools through the CMHC, this will provide stable funding to banks and mortgage lenders.

  • The Bank of Canada is supporting financial markets by expanding upon a buyback program for Government of Canada bonds. In addition, it will conduct a Provincial Bond and Corporate Bond Purchase Program, which will be put in place in the upcoming weeks.

Germany

  • The negative impact of coronavirus on the Manufacturing sector has sent financial markets into a downward spiral, with the DAX showing its largest loss since 2011, at the height of the European Sovereign Debt Crisis. This will adversely impact the German financial sector that is already struggling due to prolonged low interest rates.

  • The high probability of the interest rates remaining at 0.0% is going to hinder revenue growth for credit institutions. 

  • Credit institutions with special functions, such as the Kreditanstalt für Wiederaufbau (KfW), provide financial assistance and easy access to loans to companies severely affected by the pandemic. In doing so, they aim to prevent a credit crunch or liquidity bottleneck.

  • According to a new law, consumer loans and mortgage payments that have been taken out before March 15 can be paused for up to three months. This is to keep up consumption and protect the housing market from an influx of sellers. A consequence of the new law is likely going to be a decline in debt payments during the second quarter of 2020. Debt collection agency revenue is expected to drop in 2020.

  • As many companies run into payment bottlenecks, several health insurance companies offer them to apply for a deferral of contributions or payment in installments.

  • As they face increased costs, the financial situation of many health insurance companies is endangered by the corona pandemic. Therefore, they demand state aid.

New Zealand

  • Business interruption insurance provided by General insurers generally applies to physical damage and therefore, will not cover losses suffered by most businesses. Only businesses that have personally tailored their insurance policy for scenarios such as epidemics or pandemics will be covered.

  • Most travel insurers in New Zealand exclude payout for epidemics, pandemics and the likely threat of domestic disease. Refunds for travel insurance may apply once Level 4 government restrictions are placed on the country of destination. However, voluntary cancelations by customers will not result in a refund.

  • In late March, the Central Government announced a $6.25 billion Business Finance Guarantee Scheme. Under this scheme, income affected mortgage holders and small and medium businesses be granted six months relief for both principal and interest repayments.

  • Businesses earning between $250,000 and $80 million can also apply for a loan of up to $500,000 over a maximum period of three years.

United Kingdom

  • The FTSE100 was up 111.06 points at 6104.34 on Tuesday 26 May 2020 as easing of lockdown measure are announced, Europe start to open borders for tourism and key constitutes secure funding and restructure. Airlines, hotels and travel stocks led the charge. Oil prices were boosted by increasing hope products would adhere to supply cuts while demand picks up with more cars back on the road as lockdowns are eased.

  • As of 30 April, almost 700,000 customer accounts have been given a payment holiday on their credit cards, 470,000 on personal loans for customers facing cash-flow problems and over 27 million customer accounts have been offered three months of interest-free borrowing on the first £500 of their arranged overdrafts, according to UK Finance.

  • Over March 2020, British households repaid £3.8 billion of consumer credit, including £2.4 billon on credit cards and £1.4 billion on car finance and other personal loans; the largest repayment percentage since records began in 1987 as consumption and spending slowed.

  • According to UK Finance, almost 20% of UK mortgage holders have been granted a payment deferment to ease personal finance pressures. However, the figures prompted a warning some individuals may find themselves being turned down for future mortgage borrowing on the grounds that they are in financial difficulty. Mortgages will still accrue interest and customers must eventually pay back the full amount.

United States

  • Credit and debit card spending at restaurants and on travel and entertainment have both declined well over 50.0% in March as a result of shutdowns and travel restrictions.

  • Investment banks have experienced increased demand for investment-grade debt issuance as companies looked to raise cash.

  • Equity underwriting meaningfully declined as businesses delayed their plans of initial public offerings until market conditions stabilized.

  • Merchant payment processing volumes for e-commerce and nonsupermarket brick-and-mortar stores declined. This was a result of consumers being unable to go to nonessential stores, as well as some consumers reconsidering discretionary e-commerce purchases.

  • Major insurance companies have announced that they will be providing policyholders with premium relief as a result of the spread of the virus.

 


Real Estate and Rental and Leasing

Real Estate and Rental and Leasing COVID-19 Sector Update

Australia

  • Car rental companies are projected to report a substantial demand decline as both inbound international and domestic tourist numbers fall. As a result, revenue for the Passenger Car Rental and Hiring industry is anticipated to fall by 6.4% in 2019-20.

  • Despite moves to relax domestic lockdown restrictions in May, demand for vehicle rentals is anticipated to remain subdued, as international travel restrictions remain in place.

  • Construction activity is anticipated to be negatively impacted by COVID-19. Weak demand for new housing and project delays are anticipated to constrain demand for transport equipment, machinery and scaffolding rentals.

  • Demand from infrastructure projects is anticipated to provide some relief, as the Federal and State Government’s seek to support economic activity. For example, the Victorian Government assembled the Building Victoria’s Recovery Taskforce to support activity in the construction sector during the COVID-19 outbreak and spur economic activity in the aftermath.

  • Property operators and real estate service providers are likely to see a significant hit to revenue. Amidst the uncertainty, demand for commercial and residential leases is expected to decline. Some retail and commercial tenants are also expected to have difficulty meeting rent obligations.

  • Residential property prices are expected to fall as unemployment rises and some property owners fall into negative equity or are forced to sell. Restrictions on auctions and open for inspections are anticipated to weigh on property transaction volumes, reducing demand for real estate services. Despite moves from most states to relax restrictions, real estate transaction activity is anticipated to remain subdued.

  • The National Cabinet introduced a mandatory code of conduct covering commercial tenancies for businesses eligible for the Commonwealth Government’s JobKeeper assistance, which is businesses with an annual turnover up to $50 million.

  • The code seeks to balance the interests of landlords and tenants, and provides guidelines for rent reductions, freezes on rent increases and prohibits the termination of leases for nonpayment of rent. The code also outlines that tenants must remain committed to the terms of their lease to continue being provided protections under the code.

Canada

  • Real estate brokerage firms are expected to see less transactions as social distancing means less people will open up their homes to potential buyers. Buyers may also delay in purchasing a home.

  • Interest rates have been lowered, but lower consumer confidence is expected to offset the benefit of interest rate cuts.

  • While interest rates have been slashed, mortgage rates have not seen the same level of decline as banks have priced in a risk premium for the expected increase in defaults due to unemployment and overall lower economic activity.

Germany

  • Nonessential retail companies that have been suffering severe revenue losses have asked for March and April rents to be waived. It is expected that many landlords are going to agree to breaks in payments to be able to help shops survive and thus secure their own future revenue. Thus, severe drops in revenue for rented workspaces are expected for the current year.

  • The German construction industry federation expects a decline in demand for commercial and private contracts.

  • Real estate developers and property managers will also be affected by the crisis because property owners will look for savings potential.

  • The property boom in Germany will likely halt. Nevertheless, some projects remain attractive for investors as security investments.

New Zealand

  • The Passenger Car Rental and Hiring industry is projected to report a significant demand decline as both inbound international tourism and domestic tourism falls. As a result, industry revenue is anticipated to fall by 15.9% in 2020-21.

  • Division operators that were not considered essential services and could not provide remote working conditions for employees suspended operations to comply with Alert Level 4 lockdown requirements. The shift to Alert Level 3 on April 28 allowed businesses to resume operations. However, demand is anticipated to remain subdued.

  • Residential property prices are expected to fall as some property owners fall into negative equity or are forced to sell. Some property owners have had to reduce their rent, as tenants have run into financial difficulty amid rising unemployment.

  • The shift to Level 3 restrictions allowed real estate agents to resume private viewings of properties to potential buyers, with limits on the number of viewers allowed through a property per day.

  • An expected rise in the number of retailers and service providers going out of business is likely to negatively affect commercial landlords. Tenants are anticipated to have difficulty meeting rent obligations due to reduced consumer spending. The shift to reduce restrictions is anticipated to provide some relief for tenants as retail and hospitality businesses begin to reopen.

  • Small and medium-sized businesses may benefit from measures including changes to the provisional tax threshold and small asset depreciation threshold, or the introduction of depreciation on commercial and industrial buildings from 2020-21.

United Kingdom

  • Sellers are worried about people coming in to view their homes while buyers are worried about visiting properties where residents may be infected. Also, rising health concerns are likely to lower consumer confidence, constraining demand for new properties.

  • Record-low interest rates of 0.1% set in March may help increase the demand for properties and renting once the house market opens up again.

  • With the easing of some restrictions from 13 May, estate agents can now open, while house moves and viewings can resume again in England. However, social distancing and hygiene requirements involved in viewing properties remain. Previously, the UK housing market had been frozen as the government had issued guidance advising buyers and sellers to delay purchases until the COVID-19 crisis passes.

  • Due to the collapse in activity, many agencies have been forced to furlough staff. Plummeting confidence among buyers and sellers has also negatively affected the housing market. In the coming months, job losses and tighter lending conditions are likely to further contract the housing market. Knight Frank expects residential property sales to drop 38.0% to 734,000 in 2020 compared with 2019. However, it forecasts UK house prices to decline 3.0% in 2020, rebounding 5.0% in 2021.

  • According to Halifax and HIS Markit, the average cost of a UK property sold in April was just over £238,500, falling 0.6% month-on-month.

  • BOE said that property prices could fall by 16%, but would then recover gradually as restrictions are lifted and buyers return to the market.

  • A residential market survey by the Royal Institution of Chartered Surveyors in May found that 93% of respondents reported a fall in buyer inquiries in April, while 96% stated that the number of sellers asking for their properties to be marketed had dropped.

United States

  • Overall, the method by which realtors and industry operators conduct their business has been disrupted by the outbreak of COVID-19. Due to mandated social distancing and the limitations imposed on gathering size, many showings and open house events have been canceled. If industry operators cannot rent or sell inventory, industry revenue is expected to decelerate and eventually decline. However, recent reporting has shown success in certain firms who have previously invested in “realtor-less” showings via online appointments and electronic pin locks, which allow prospective renters to view units without a realtor present.

  • The Real Estate Sector is expected to face stiff headwinds as a result of the COVID-19 outbreak. Due to the forced shuttering of businesses and rising unemployment, residential and nonresidential renters alike do not have the cashflow to afford rent and other debt obligations. Failure to pay will result in evictions and foreclosure, greatly weakening sector performance due to a decline in overall demand. However, this deflation and weakness in the sector may also present a strong buying opportunity for institutional buyers with balance sheets in better repair, with strong acquisition activity expected by the industry’s largest payers.

  • The rental of equipment may be buoyed as capital expenditures are trimmed by downstream operators and industrial operators, as they opt to rent machinery and equipment as needed, instead of outright purchasing equipment in order to keep balance sheets clean and cashflows steady.


Professional, Scientific and Technical Services

 

Professional, Scientific & Technical Services COVID-19 Sector Update

Australia

  • As businesses seek to reduce costs in the face of economic uncertainty, demand for consulting services is anticipated to decline. Some large professional and legal services providers have been forced to reduce staff hours and pay in response to slowing business activity.

  • According to the ABS, 96.0% of businesses in the Division have continued operating throughout the lockdown periods. However, 36.0% of businesses within the Division were reported to have made changes to their workforce, including changing work locations, reducing hours or placing staff on paid leave.

  • IT consulting services are anticipated to experience a boost in demand, with the ABS reporting that over 35.0% of Australian businesses have changed how they provide products or services, such as shifting to online services. IT consultants are expected to benefit from businesses shifting online and an increase in employees working remotely.

  • As businesses seek advice on how to manage and mitigate costs associated to COVID-19, management consulting firms are anticipated to experience some demand resilience. However, demand for discretionary services is expected to significantly decline.

  • Providers of architectural and engineering services may benefit from government efforts to support economic activity through increased infrastructure spending. For example, the Victorian Government assembled the Building Victoria’s Recovery Taskforce to support activity in the construction sector during the COVID-19 outbreak.

  • Scientific research services are expected to increase in demand, as the world searches for a vaccine. Both private and public funding is expected increase to support the increased demand for research services. As a result, revenue for the Scientific Research Services industry is anticipated to grow by 5.7% in 2019-20.

  • With the various state governments moving to relax lockdown restrictions in May, operators in the Division may experience a rebound in demand as economic activity recovers.

Canada

  • Consultants and advisors are expected to experience volatile renewals from key clients during times of uncertainty.

  • Advertising agencies and services are expected to experience a decline in investment as key clients are not operational or have reduced output capabilities.

  • Digital services that promote the ability to collaborate online, organize projects and support business infrastructure are expected to increase as businesses are forced to operate remotely.

  • With operators offering countercyclical services, demand for the most recent regulations or protocols will support consultants to remain competitive.

Germany

  • Due to closed stationary retailers as well as consumers’ insecurities about their own financial future, consumption has dropped severely, especially in the months of March and April. Despite nonessential retail stores reopening in May, consumer confidence is still low. Consequently, advertising agencies and services are experiencing a drop in demand for their services, as companies do not see the potential to increase consumption significantly by advertising their products.

  • Cloud services and online meeting rooms have experienced demand increases due to increased remote working and the need to collaborate. It is expected that many companies will stick with the new technology, thus increasing revenue for tech companies supplying these applications.

  • Programming services are expected to lose revenue in 2020. To save costs, many companies put nonessential projects on a halt. However, the pandemic also proves to many German companies that it is vital to catch up with digitalization. Once the economy is recovered, demand for programming services is expected to increase drastically.

  • High insecurities about consumer preferences and the economic impacts of the major shutdowns increase demand for market research services. Thus, market research revenue is expected to increase in 2020.

  • Translation services experience a drop in demand due to delayed movie releases, cancelled or postponed conventions and trade fairs as well as migration being put to an almost complete halt. Revenue for 2020 is expected to drop and many freelance translators are threatened to leave the market. However, loans are being issued to soften the impact of COVID-19 on freelancers.

  • Many freelance services are expected to suffer a delayed impact of the economic downturn during the pandemic. However, aids can only be applied for until May 31. Thus, Bundesverband der Freien Berufe (BFB), an association to protect freelance providers, is demanding to extend the deadline until the end of August. Else, many freelance suppliers fear having to leave the market.

New Zealand

  • As businesses across most sectors of the economy seek to reduce costs in the face of economic uncertainty, demand for professional services is anticipated to decline. In particular, demand for discretionary services, such as strategy consulting, is anticipated to fall sharply, while demand for other services, such as restructuring advice, may remain more resilient.

  • IT consultants are anticipated to benefit from increased demand for IT services and firms increase their technological capabilities. However, many businesses are also likely to reduce business expenses, such as consulting costs, in response to a slowdown in economic activity.

  • A number of large professional and legal services providers have been forced to reduce staff hours and pay in response to slowing business activity. However, some cities, such as Christchurch, have introduced business support subsidies to help small businesses seek professional advice.

  • Demand for New Zealand scientific research services is expected to increase as the world looks for a vaccine. Funding for research projects relating to COVID-19 are expected to increase in line with growing demand for research services.

United Kingdom

  • Some consultancies have benefited as businesses try to understand the economic impact of coronavirus on their operations and need advice on how to deal with the challenges. However, plummeting business confidence and business revenue would lower budgets and spending, in turn reducing demand and fees. Low consumer spending on nonessential services is also expected to contribute to the drop in overall demand.

  • If the number of insolvencies rises, legal activities are likely to benefit. Law firms have also recorded a boost in enquiries and requests to draw up wills, with the Law Society reporting a 30.0% increase on usual requests. Legal operators have also been in demand for advising and assisting both employers and employees regarding their rights and any issues they may face due to the pandemic. Businesses may seek help in addressing supply chain disruptions and settling disputes.

  • Advertising revenue is falling as businesses cut spending. The Advertising Association and WARC state that total UK ad spend is expected to decline 16.7% in 2020 compared to 2019, equating to £4.23 billion. Digital ad spend is set to decline for the first time since its advent. Nonetheless, ad spend is expected to rebound and grow by 13.6% in 2021.

  • Funeral activities will see a surge in demand as death toll rises in the UK.

United States

  • Businesses are expected to provide services remotely as much as possible, although many will have to be put on hold.

  • Overall, advertising spending is anticipated to take a hit, as business pull back on nonessential services and events are canceled. However, some areas might still experience demand. Internet traffic is anticipated to remain strong and with more people at home, television networks and streaming services are expecting more viewers. As a result, advertising spending on these mediums may see more demand.

  • Professionals providing accounting services, legal services and management consulting services may see a spike in demand from businesses and individual clients seeking advice and guidance on how to protect themselves legally and financially as the COVID-19 pandemic forces the world to shift to a new normal and volatility remains high. Overall, however, demand is expected to drop significantly as corporate and individual customers drastically reduce their spending on nonessential services.


Education

Education COVID-19 Sector Update

Australia

  • NAPLAN testing has been cancelled for the current year. The High School Certificate (HSC) will continue, with university enrolment for Semester 2, 2020 and Semester 1, 2021 to remain in place.

  • The Federal Government is pushing for all schools to reopen after term break, but on a limited basis. While some domestic schools have reopened after term break, several schools are transitioning to online learning in Term 2.

  • Following NSW’s ease in restrictions, NSW announced its back to school plan on 21 April 2020.

  • The plan involves a staggered return to school from May 11. Students will initially return to school for one day a week, and school days will be progressively increased. However, Year 12 students will attend school full-time, with extra classes catered.

  • NSW students are projected to return to school full time from May 25. Enhanced measures, including temperature testings and extra cleaning will be introduced in schools.

  • In Victoria, students started 2nd term school on April 15. However, onsite learning will only be available to students whose parents cannot work from home and vulnerable students.

  • the estimated 950,000 international student enrolments in 2019, over one-quarter originated from China. As Chinese students are a key source of income for many domestic universities, many have decided to allow students to study remotely. Many universities have shifted to delivering lectures online due to the social distancing restrictions.

  • On April 12, the Federal Government announced higher education relief package that includes $18.0 billion for domestic students, $100.0 million in regulatory relief for education providers and funding for short courses for people who have lost their job or are looking to retrain.

  • Universities and state governments across Australia have announced varying amounts of fund to support international students. Support packages include one-off payments, assistance with food and shelter or mental health support.

  • Victoria has committed $45.0 million to support international students facing financial hardship. The fund is expected to provide up to $1,100 for international students who have lost their job or had significant hours reduced to their employment due to the outbreak of COVID-19. South Australia has announced support package worth $13.8 million to assist international students. International students in South Australia can also access emergency cash grant of $500.00. Queensland has also allocated $2.2 million to assist international students.

  • The Federal Government has announced a three-stage roadmap to reopen Australia. While the final stage of reopening is anticipated to be achieved in July, it is up to each state and territory to decide when to move from one step to the next. The Federal Government is anticipating universities to reopen for semester two, with the adherence to the Australian Health Protection Principle Committee guidelines. It is estimated that 1.5 million university students could be back on campus for face-to-face teaching by July.

Canada

  • The Education sector is expected to be greatly affected by the coronavirus outbreak, namely in the form of increasing numbers of school closures and an increasing shift to online-only classes as an alternative to physical school attendance.

  • As of the time of this writing, every province in Canada has closed its schools in an attempt to halt the spread of the novel coronavirus. The province of British Columbia, in fact, was the last Canadian province to declare that it was going to shutter its elementary and secondary schools indefinitely due to COVID-19, with officials investigating electronic learning as a viable option in the meantime.

  • The Colleges and Universities industry in Canada, however, may benefit despite its wide-reaching closures should essential medical research among universities as well as university-affiliated institutions continue as medical professionals and public health officials scramble to find treatments for the novel coronavirus while simultaneously attempting to contain its spread.

Germany

  • Childcare services and schools have closed due to the outbreak, but many are offering to care for children whose parents are considered essential workers.

  • Many schools are reopening partially and enable pupils in the final classes to prepare for their exams.

New Zealand

  • Schools and early childhood education centres are expected to resume fully from 18 May. However, the first day of school term started on 29 April, with students up to Year 10 who cannot study from home, or whose parents need to return to work returning to campus.

  • New Zealand’s borders remained closed to all nonresidents with the exception of immediate family members of residents. Consequently, international students that are not in New Zealand will not be able to enter the country.

  • Tuition fees from Chinese students provide a key source of income for NZ universities, and the ban is likely to have negative impacts on the sector in the short-term and, potentially, in the longer term.

  • Since level 4 lockdown in late March 2020, the government removed the working hour-restrictions for international students who are already working in major supermarkets. International students that are existing healthcare workers are also allowed to work full-time for a period of three months.

  • The restrictions put in place for Alert Level 3, such as bubbles of 10, no sharing of food or cutlery and staggered entry and exit times, will be considerably relaxed for early learning. Universities can reopen as the country enters Alert level 2. However, universities are expected to adhere to public health requirements and physical distancing.

  • Despite this, some universities, such as Auckland, AUT and Massey Universities, have announced that they will keep teaching online-only for the rest of the half-year, with a few exceptions.

United Kingdom

  • From 1 June 2020, Reception, Year 1 and Year 6 pupils will be the first to return to school first from 1 June 2020 in phases. On June 15, up to a quarter of Year 10 and Year 12 – the first years of GCSE and A-level exams - will be allowed some contact to prepare for exams. The remaining years are unlikely to return to school before Summer 2020. Potential safeguarding measures include limiting class sizes, pupils attending on different days, redesigned classrooms and staggered break times.

  • On May 4, Ministers unveiled a package to help universities. Initiatives include permitting institutions to charge the full £9,250 annual tuition fee for undergraduates while campuses remained closed and face-to-face classes were suspended, securing a potential £2.6 billion worth of revenue.

  • The stabilisation programme, which contains no new government money, allows universities to impose a cap on the number of British and EU students that each university can enroll in the next academic year, up to 10,000 additional student places to be made available in England, at least 5,000 of which will be ringfenced for nursing, midwifery or health courses related to the Covid-19 crisis, and funding for those in financial hardship. Following this, however, Russell Group institutions face a £1.7 billion shortfall as a result of the expected drop-off in overseas students. Universities have also been offered an advance of £100.0 million for research, although this falls far below the £2.0 billion requested.

  • However, a survey by London Economics suggests 17.0% of students, or 12,000, are willing to defer enrolments for the 2020-21 academic year if classes were delivered online and other activities curtailed. This could result in a potential £763 million loss of tuition fee income.

  • The graduate job market remains fragile. According to the Institute of Student Employers (ISE), entry-level roles have been reduced by 23.0% this year, and is anticipated to shrink by a further 15.0% in 2021 as employers scale back recruitment.

United States

  • The coronavirus outbreak is expected to have an asymmetrical effect on the Educational Services sector. Since most schools, colleges and universities are required to close as a result of the coronavirus outbreak, they have shifted to deliver classes online.

  • California and New York have announced that schools will remain closed for the remainder of the 2019-20 school year.

  • The CARES Act allocates $30.75 billion in funding to the education sector, enabling K-12 schools, colleges and universities to provide students with technologies to conduct remote learning. The CARES Act also provides $3.5 billion for Child Care and Development Block Grants and $750.0 million for Head Start to support early education.

  • Under the national emergency education waivers, Secretary Betsy DeVos has the right to waive the mandatory assessments, accountability, and related reporting requirements under Every Student Succeeds Act for the 2019-2020 school year.

  • Due to its compulsory nature, the Elementary and Secondary Schools subsector is unlikely to experience a significant decline in demand resulted from school closures. However, within this subsector, operators in the Private Schools industry are expected to be hit harder compared with the Public Schools industry as they operate on a for-profit basis.

  • The Colleges, Universities, and Professional Schools subsector is anticipated to experience lower demand from international students, especially Chinese and South Korean students. Similarly, within this subsector, operators in the For-Profit Universities industry are at higher risks.

  • Overall, Business Schools and Computer and Management Training subsector, Technical and Trade Schools subsector, Other Schools and Instruction subsector and Educational Support Services subsector are expected to endure a drop in demand as their services are considered discretionary. Therefore, customers will likely postpone their enrollment until the risks associated with coronavirus decrease.

 


Healthcare and Social Assistance

Healthcare & Social Assistance COVID-19 Sector Update

Read IBISWorld's white paper for even more information on the effects of COVID-19 on global healthcare systems.

Australia

  • Aged care residential facilities may require additional medical supplies and will likely put in place strict quarantine measures to prevent the spread of disease.

  • Heath Services industries are expected to face supply shortages, particularly for basic medical supplies such as surgical masks and hand sanitiser.

  • The Australian Department of Health has added bulk billed MBS Telehealth Services to allow people access to essential health services in their home while in quarantine and/or self-isolation.

  • On March 29, the Federal Government announced an additional $1.1 billion health package aimed at boosting metal health services, domestic violence support services and Medicare assistance for both emergency food relief and people at home.

  • On April 6, the Early Childhood Education and Care Relief Package was implemented. This package is aimed at providing additional support to families and the Child Care Services industry. This is expected to help retain employees and keep early childhood operators open during this period.

  • Since the initial outbreak, hospitals have delayed nonessential elective surgeries only allowing Category 1 procedures. On April 27, the Australian Health Protection Principal Committee (AHPPC) loosened restrictions for elective surgeries. Approximately 25.0% of private and public operations closed are expected to reopen, due to the loosening of restrictions. Furthermore, in addition to Category 1 elective surgeries, Category 2 and some Category 3 surgeries have been permitted. The easing of restrictions should provide some relief to elective health care services and increase demand.

Canada

  • The Hospitals and Ambulatory Health Care Services subsectors will experience surges in demand, particularly from the Medical and Diagnostic Laboratories industry group.

  • Alan Drummond, co-chair of public affairs for the Canadian Association of Emergency Physicians, said that Canadian hospitals have been trying to function at 100.0% capacity or higher on a day-to-day basis. In Ontario, many hospitals operate at 120.0% capacity. As a result, revenue increases for CA hospitals may not be as significant as in the US due to capacity already being maxed out.

Germany

  • Hospitals are encouraged to postpone scheduled operations and keep their capacities free for the care of corona patients.  However, they are now allowed to perform more plannable operations again as long as some part of their capacities remains free for the care of corona patients.

  • Many hospitals fear liquidity bottlenecks due to the expansion of capacities and simultaneously stagnating revenues due to postponed operations. 

  • The Hospital Relief Act is intended to provide financial relief to hospitals during the crisis. For example, they will be paid €560.00 for each free bed more compared to the previous year.

  • General practitioners' surgeries are recording significantly fewer patient numbers, as many patients are afraid of infecting themselves with COVID-19 in the doctor's surgery. 

  • Mail-order pharmacies were able to significantly increase their order volume with the beginning of the crisis.

  • Laboratories that test samples for coronavirus face rising demand, especially since health insurers are taking over the costs of testing risk groups.

New Zealand

  • The New Zealand Central Government has enacted quarantine measurements to prevent the spread of COVID-19, with current capacity to test over 500 patients per day

  • Hospitals, General Practitioners and Aged care residences will likely face medical supply shortages, such as face masks, due to reductions in production from overseas medical equipment and supply manufacturers

  • On March 25, the Central Government moved to Alert Level 4 for five weeks, which has restricted the subdivision to primary care services, which also includes dental and allied health services. The Central Government also recommended that noncontact consultations should be used where possible, such as virtual consultations.

  • Allied health and other less essential health services are expected to face challenges related to COVID-19, as many patients will likely delay unnecessary medical appointments.

  • On April 27, the Central Government transitioned to Alert Level 3 for two weeks, allowing for elective surgery and other healthcare services. Furthermore, although virtual appointments are still recommended, face-to-face appointments have been permitted. This is expected to slightly increase demand for healthcare services.

  • At Alert Level 2 general practices on May 14, community health, metal health and addiction services are expected to operate as normal.

United Kingdom

  • On 21 May 2020, Oxford University started trial of two anti-malarial drugs, chloroquine and hydroxychloroquine, on UK health workers to determine if they are effective in preventing COVID-19.

  • The COVID-19 antibody testing programme is due to start over the week commencing 25 May 2020. Antibody tests will be available to NHS and care staff, eligible patients and care residents in England to see if they have had the virus.

  • Doctors Association UK (DAUK) and the Good Law project have started to pursue legal action to force the UK government to launch an inquiry into its failure to provide adequate personal protective equipment for NHS staff and other frontline care workers. This comes after the Department of Health and Social Care (DHSC) withdrawing a model of protective goggles because they offered insufficient protection.

  • On May 4, blood diagnostics company, Quotient, announced it has developed a new COVID-19 antibody test which they say produces results in 35 minutes with 99.8% accuracy. Each serological screening machine has capacity for up to 3,000 tests a day. The company currently has 12 screening machines available, with a further 20 expected to be ready by the end of the year, but it has already had talks with interested parties across the continent.

  • The first coronavirus vaccine human trial in Europe started on April 23 in Oxford. Another team at Imperial College London hopes to begin human trials of its coronavirus vaccine in June. Both parties have received more than £40.0 million worth of government funding.

United States 

  • The Hospitals, Outpatient Care Centers and other ambulatory healthcare industries are seeing a surge in demand from patients seeking COVID-19 testing and treatment.

  • Hospitals and other ambulatory care providers are facing a shortage of N95 surgical masks and other protective facemasks. Hospitals are urging people with stockpiles of surgical masks to donate them to local healthcare providers. In a move to increase the supply of masks, new legislation protects 3M, Honeywell and other respirator manufacturers from lawsuits when selling masks to healthcare workers.

  • The Telehealth Services industry is experiencing a significant increase in demand and revenue as people are seeking out telehealth services to avoid going to healthcare facilities and potentially spreading or contracting COVID-19.

  • Medical and diagnostic laboratories are increasing production to increase their COVID-19 testing capacity.


Arts, Entertainment & Recreation COVID-19 Sector Update

Australia

  • Public gatherings have been limited to 10 people under step 1 of the Federal Government’s framework to ease restrictions, excluding households and places of work. All gyms, museums, libraries, indoor sports venues, cinemas, youth centres, community halls, amusement parks, arcades, outdoor and indoor markets have closed, having a strong negative effect for many industries in the Arts and Recreation Services division. However, outdoor physical recreation such as playgrounds and swimming pools will be allowed to resume operations with fewer than 10 people under step one of the Federal Government’s framework to ease restrictions. Indoor recreation venues will remain closed until step 2, at which time they can operate with up to 20 people.

  • Gyms and fitness centres are anticipated to continue focusing on alternative revenue streams such as streaming workouts and outdoor bootcamps until indoor recreation is permitted.

  • Concert venues, museums and galleries will be allowed to open under step 2 of the framework to ease restrictions.

  • Crown Casino has lost its exemption to social distancing measures and will be included in the shutdown of nonessential services. Consequently, revenue for the Casinos industry is anticipated to decline significantly.

Canada

  • Movie theatres across the country have closed indefinitely in an effort to help contain the virus. Many movie release dates have been postponed or the movies have been released on streaming services.

  • Many art institutions, including concert tours, museums, theatres and symphonies, are closed as restrictions on large public gatherings have been put into place, but are offering online virtual tours and performances to help ease boredom and fear during the pandemic.

  • Many art institutions have postponed or canceled events, and are either closed or are switching to limited services. This has led to temporary layoffs of many of these institutions’ employees.

  • Every sporting event in the country is canceled or delayed with various timelines for each sport.

  • On March 22, the Canadian Olympic Committee and the Canadian Paralympic Committee announced that the Canadian athletes will not compete at the Tokyo 2020 Games due to the pandemic. The committees requested that the International Olympic Committee postpone the games for a year. On March 24, it was announced that the games would be postponed until 2021.

Germany 

  • As museums have been forced to close in March and April, it is expected that their revenue will plummet in 2020. Even though they were allowed to re-open again in May, visitor numbers are expected to stay low due to social distancing. Most sports games and professional sports activities in Germany are suspended. Both the professional German Ice Hockey and Handball championships have been cancelled.

  • German professional football, the sports leagues with the highest revenues are paused until May 16, leading to huge financial distress for sports clubs as they need the income from ticket sales and sponsoring to finance players and other employee salaries. Leagues plan to finish current sports seasons until June 30 without spectators to earn pending broadcast revenues.

  • The offer of sports betting is almost zero due to cancelled games.

  • On March 16, the German government decided to stop sports activities at all public and private sports facilities. This will lead to major revenue slumps for sports facilities and clubs. 

New Zealand

  • Museums, libraries and gyms are able to reopen under alert level 2. However, these firms will be required to observe social distancing guidelines.

  • Professional league sports are able to resume under alert level 2. However, games must take place without spectators. The annual Budget has allocated $256 million to be spent on reviving the sports sector. This includes $83 million of immediate relief, $104 million for rebuilding operations over the medium term, and $78 million for technology and innovation over the long term.

  • SKYCITY Casinos’ international business division has been affected by COVID-19 related travel restrictions, with some planned visits from key clients postponed or cancelled. Around 90% of the group’s EBITDA is derived from local business. Casinos are able to resume operations under alert level 2.

United Kingdom

  • Libraries have reported a surge in online borrowing during lockdown as the UK population turns to e-books. According to trade association, Libraries Connected, 120,000 people joined libraries in the three weeks after lockdown began and loans of online e-books, e-magazines and audiobooks were up an average of 63.0% in March compared with last year.

  • Independent Museums not backed by regular grants or funding are thought to be most at risk of permanent closure following social distancing measures. Independent institutions largely depend on entrance fees and retail expenditure in gift shops. The timing of the closure has coincided with museums’ busiest months, including Easter and string of bank holidays.

  • Even as lockdown measures are eased, UK Cinemas are expected to struggle. Aside from social distancing measures, cinemas will contend with delayed premiere dates as well as film releases as production operations have been mothballed. For instance, originally scheduled for a release date of May 1, Marvel's Black Widow has been pushed back to 6 November 2020. At present, 5 of Marvel’s films rank in the top 10 grossing films of the 21st Century.

  • Fears over problem gamblers rises as isolation, boredom and financial distress increase with COVID-19 and are contributing to addiction. Charity, organization GamCare which runs the national gambling helpline, noted a rise in requests to lift self-imposed gambling limits. The cancellation of major sporting events has also prompted betters to turn to more addictive gambling options. Politicians, doctors and academics have urged the Department for Digital, Culture, Media and Sport to implement a maximum stake on online betting and suspend gambling advertising during the lockdown.

  • Demand for online streamlining and video platforms has increased sharply as households turn to services such as Netflix and Disney+ during lockdown, with Netflix reporting almost 16 million people new accounts across the globe in the first three months of the year 2020. At the same time, demand for online fitness videos and classes has boomed as gyms remain closed as consumers seek fitness routines. New forms of entertainment have arisen with the video-chatting app Houseparty reaching number one on Apple’s top download list. Meanwhile, households are also seeing a revival of traditional boardgames and puzzles.

United States

  • Operators in the Sports Franchises industry are expected to experience revenue declines as the NBA, the NHL, the 146th Kentucky Derby, the 2020 XFL Championship Game, the US Open and many more have been either canceled or suspended due to the coronavirus outbreak. 

  • In the Racing & Individual Sports industry, The National Association for Stock Car Auto Racing has suspended the seven Cup Series races.

  • Several relief funds were launched to support operators in the Independent Artists, Writers, and Performers industry. Notable funds include Artist Relief fund, Freelancers Relief Fund, Artist Relief Project and so on.

  • The cancelation of major festivals, such as the Coachella Valley Music and Arts festival, hosted by industry players in the Concert & Event Promotion industry, underlines the actions taken by industry operators to comply with public health guidelines.

  • Operators in the Gambling Industries subsector are expected to temporarily shutter amid the coronavirus outbreak, resulting in a loss in revenue.

  • Many operators in the Gym, Health & Fitness Clubs industry, the Museums industry, the National & State Parks industry, the Sports Franchises industry and Concert & Event Promotion industry have introduced online offerings such as virtual tours, online classes and streaming services.

  • The Non-Hotel Casinos industry, Ski & Snowboard Resorts industry and the Amusement Parks industry are susceptible to revenue declines as they garner a notable share of revenue from international customers.

  • To prevent mass layoffs, the Small Business Administration has launched the Paycheck Protection Program, providing an estimated $3.7 billion in loans to operators in the Arts, Entertainment and Recreation sector.

 


Accommodation and Food Services

Accommodation & Food Services COVID-19 Sector Update

Australia

  • Travel restrictions are expected to result in a sharp drop in demand from overseas and domestic tourists. These restrictions are expected to halt demand from international and domestic tourists for the duration of the pandemic. Additionally, government restrictions on nonessential activity have resulted in the closure of many accommodation providers.

  • Government restrictions have mandated the closure of all restaurants, cafes, bars and clubs. These businesses were not allowed to trade, except for to offer takeaway services. Consequently, division revenue is expected to contract sharply as a result of these government regulations. Additionally, the expected decline in discretionary incomes are expected to limit demand for takeaway services, contributing further to the divisions expected revenue decline.

  • As of May 11, food service operators in South Australia are allowed to offer outdoor dining services. On May 15, food service operators in New South Wales and Queensland are expected to open for dine-in customers. However, they will be limited to a maximum of 10 patrons at a time. Those in Western Australia are expected to open for dine in services for a maximum of 20 patrons. Operators in the Northern territory will be allowed to open as normal.

  • Under the Government’s JobKeeper Scheme, industry operators can receive $1,500 per fortnight for every person employed. Operators are legally mandated to pass this payment onto employees. This scheme is forecast to limit the decline in industry employment, despite a forecast decline in industry revenue.

Canada

  • Many food service operators are struggling to stay afloat due to significant drops in revenue and are pleading with provincial governments for assistance to prevent bankruptcies. While many food service operators have switched to take out, the drop in revenue for many makes it not financially feasible to keep their doors open. Therefore, many food services locations have shut down indefinitely due to the virus. This has led to many layoffs or furloughs of employees. Operators that are staying open for takeout are still forced to lay off parts of their staffs and reduce hours of those remaining. Some operators are considering closing down permanently if the outbreak lasts more than a couple months.

  • Prime Minister Justin Trudeau has announced a spending package, which includes a wage subsidy for small businesses and the ability to defer tax payments until August, to help Canadians and businesses through the outbreak.

  • The Hotels & Motels industry in Canada and other tourism related industries have also experienced significant losses as tourism is significantly decreased due to government enacted orders and regulations in addition to the significant push of social distancing. Prime Minister Justin Trudeau announced on March 16 that Canada will close its borders to noncitizens, with the exception to United States citizens, due to the coronavirus. However, on March 20, Canada and the US closed the border to tourism and recreational travel. Furthermore, in hopes to slow the spread, social distancing and staying home has been encouraged. This has led to domestic trips also decreasing rapidly as the spread has reduced many potential customers’ desires or abilities to travel. Consequently, many tourism attractions such as national parks and ski mountains, along with theatres and restaurants, are closed indefinitely. Therefore, many people are either cancelling or postponing their trips, therefore demand for accommodation has plummeted. Accordingly, many hotels and motel operators along with other tourism related industries have either laid off or furloughed majority of their staff as they have very little revenue coming in.

  • Many campgrounds and ski mountains have closed indefinitely to help contain the spread of the virus. Some campgrounds have remained opened but are limiting use of the facilities.

Germany

  • As a result of canceled trade fairs, business and private trips and the worldwide travel restrictions, hotels have already been recording substantial revenue losses since the beginning of March. Despite promised financial support, short-time work and the suspension of the obligation to file for insolvency, hotel closures are likely to be unavoidable in the coming months. 

  • Restaurants and cafes are allowed to reopen on May 15 but are subject to the distance regulations.

  • By the end of May, hotels in all federal states are expected to open again.

New Zealand

  • New Zealand’s travel ban for tourists is expected to negatively affect the Accommodation and Food Services Division.

  • International leisure travellers account for over 30.0% of the Hotels and Resorts industry’s revenue, the reduction in international visitors is likely to significantly reduce revenue for many establishments.

  • On May 11, the government announced that the country would move to alert level 2. Alert level 2 will allow for operators across the subdivision to reopen, assuming they can offer services while adhering to social distancing restrictions.

  • However, despite the easing of restrictions, demand for subdivision services are expected to remain subdued due to growth in the national unemployment rate and the expected decline in discretionary incomes. Despite this expected revenue decline, the decline in industry employment is expected to be largely limited, due to the Central Government’s Wage Subsidy programme. Under this scheme, operators will receive up to $585.80 per employee to be paid toward wages.

United Kingdom

  • Cafes, pubs and restaurants were ordered to close as of March 20 by Boris Johnson. However, takeaway food can still be ordered. On 11 May, the government published a plan of recovery and easing of measures, stating that hospitality venues will not reopen until 4 July at the earliest.

  • Many businesses may struggle to pay workers’ wages. The government announced it will pay employee wages of those unable to work due to the pandemic in a radical move aimed at protecting people's jobs, known as the Coronavirus Job Retention Scheme. It will pay 80.0% of salary for staff who are kept on by their employer, covering wages of up to £2,500 a month. The wage subsidy will apply to firms where bosses have already had to lay off workers due to the coronavirus, as long as they are brought back into the workforce.

  • On March 17, the Chancellor confirmed that he was extending the business rates holiday to all businesses in the hospitality sector for the 2020 and 2021 tax year and a Retail, Hospitality and Leisure Grant (RHLG) of up to £25,000 for smaller businesses with a ratable value less than £51,000.

  • ONS survey of businesses for the period 6 April to 19 April 2020 reported that 81% of businesses in the accommodation and food service activities sector reported temporarily pausing trade

  • UKHospitality believe that approximately 500,000 roles have been axed since the start of March, with a further 500,000 seasonal workers that may no longer be offered jobs in the sector as vacancies in the hospitality sector have plummeted.

  • Some large industry operators, such as McDonald’s, Burger King and KFC have reopened some stores for delivery only.

United States

  • The Accommodation and Food Services sector is at risk for a sustained drop in demand stemming from elimination of most inbound international travel, the cancelation of all large-scale events and the forced closure of many bars and restaurants. These orders have been in place for over 40 days in most of the US.

  • The Accommodation subsector is expected to see a decline in demand as the US government has banned all inbound travel to the US from several countries, including China and the European Union.

  • Domestic travel has also undergone substantial declines as more travel restrictions increase and individuals abide by stay-at-home orders. Further, many US consumers are reluctant to travel due to fear of contracting or spreading the virus. This further reduces demand for the Accommodation subsector.

  • Hotels and motels saw a sharp reduction in occupancy rates in March of 2020. This decline continued into April. According to the American Hotel and Lodging Association (AHLA), nearly 8 of every 10 hotel rooms were empty across the country as of April 22.

  • The Coldwell Banker Richard Ellis group (CBRE) has forecast that hotels and motels will dee revenue loss of 80.0% for the second quarter of 2020.

  • The Food Services subsector is expected to be hit substantially, especially in large cities, as many bars and restaurants have been mandated to close by local and state governments.

  • The forced closures lead to extremes spikes in unemployment within the sector as many small businesses cannot afford to pay staff while they are closed. Even operators that do remain open may have reduced the size of their staff to match reduced demand.

  • According to the National Restaurant Association (NRA), the food service industries are forecast to lose $80.0 billion in sales by the end of April.

  • The Mobile Food Services industry may see an increase in demand as consumers seek to mitigate their exposure to the virus while supporting business and eating at home

 

Administrative and Support Services COVID-19 Sector Update

Australia

  • Travel agencies are expected to record significant declines in revenue over the second half of the 2020 fiscal year due to the COVID-19 outbreak.

  • In March 2020, both Flight Centre Travel Group and Webjet Limited withdrew their 2020 fiscal year guidance. Furthermore, Flight Centre announced that up to 100 underperforming leisure shops will close.

  • With large gatherings now banned and domestic tourism discouraged, the Tour Arrangement Services industry is expected to record a significant decline in revenue over the remainder of the 2020 fiscal year.

  • The Federal Government’s plan for relaxing restrictions on movement and gatherings includes a gradual relaxing of restrictions on travel, with domestic travel likely to resume soonest. The Australian Government has reportedly discussed a trans-Tasman travel ‘bubble’ with the New Zealand Government that would enable travel to resume between the two countries. These relaxed restrictions would likely provide some support to travel agents and tour operators.

  • The decline in economic activity and global economic uncertainty are expected to reduce demand for job placement and recruitment services. Job listings have fallen significantly since public health measures restricting movement and gatherings were introduced, indicating lower hiring activity.

  • Demand for cleaning services has remained strong as businesses that have remained open have required additional cleaning.

  • Building cleaning services use handwash or hand sanitiser to stock bathrooms. However, increased demand for hand sanitiser, disinfectants and other cleaning products could lead to supply constraints for cleaners. Major retailers Coles, Woolworths and Chemist Warehouse have all reported a sudden increase in demand for hand sanitiser due to the COVID-19 outbreak, which has limited supply. However, many domestic manufacturers, particularly alcoholic beverage manufacturers, are now manufacturing hand sanitiser to boost domestic supply.

New Zealand

  • A decline in tourism is anticipated to significantly reduce revenue for tour arrangement services.

  • While travel to Australia may resume as part of a trans-Tasman ‘bubble’ arrangement in mid-to-late 2020, international travel to other destinations is expected to remain restricted for some time.

  • The economic effects of the COVID-19 outbreak are anticipated to reduce demand for employment placement and recruitment services, as businesses reduce their hiring activity. Demand for these services is anticipated to recover in line with the wider economy.

  • Many building support services, such as cleaning services, were required to suspend operations under the Alert Level 4 and Alert Level 3 restrictions. Demand for these services is anticipated to rise following New Zealand’s move to Alert Level 2 on May 14, which has allowed most businesses to reopen. However, demand is expected to remain comparatively low as many individuals continue to work from home.

  • Increased demand for cleaning products, such as disinfectants and hand sanitiser, to moderately affect building cleaning service providers. Supply constraints are anticipated to place upward pressure on price of hand sanitiser and increase the cost of cleaning services.

 

Public Administration and Safety COVID-19 Sector Update

Australia

  • The impact of COVID-19 on the Public Administration and Safety sector has thus far been minor. As of May, this sector is operating normally with little impact from quarantine measures. If a widespread outbreak were to occur in Australia, a potential need for Australian Defense Force resources could arise. For example, military barracks could be repurposed into quarantine centers, or military assets could be used to transport and distribute medical supplies.

  • As at time of writing, the Federal Government Australia released a 3-step roadmap for recovery from the COVID-19. The roadmap will be reviewed every three weeks and is anticipated to be fully executed by end of July; However, each state will move at their own pace. While Australia is expected to gradually lift movement restrictions as the curve of COVID-19 has flattened, strain on police and firefighting services may increase if the number of COVID-19 cases in Australia suddenly rises significantly. Police resources could be required to maintain quarantine zones and disease control orders.

  • Correctional and detention facilities may be at a higher risk of attracting and spreading COVID-19, due to the number of people kept in close quarters and potentially adverse sanitary conditions.

New Zealand

  • COVID-19 has had a minimal impact on the Public Administration and Safety sector. However, in the event of a widespread pandemic in New Zealand this sector is likely to be one of the most disrupted. The Defence industry could be called upon to provide logistical support for the delivery of medical supplies, or to help maintain quarantine control. Firefighters could potentially be disrupted due to insufficient supply of personal protective equipment, such as face masks.

 

United States

Read IBISWorld's State and Local Public Administration Sector Report for the United States to understand how the events of 2020 have caused a drastic reversal in the economic trends that influenced growth in the preceding four years. 

 

Personal Services COVID-19 Sector Update

Australia

  • There is expected to be a greater reliance on repair and maintenance services the longer COVID-19 remains a threat.

  • A significant share of the tools that are used by operators in this sector, such as photographic equipment, power automation products and machine tools and parts are imported from China, United States and Germany. With many factories temporarily closed in China, United States and Germany, it could lead to a shortage of tools and parts required by repair and maintenance operators and photographic film processors.

  • Australian banks have also announced their support to small businesses by offering small business loan repayment deferrals of up to six months. This is expected to support smaller industry operators that are affected by the expected decline in consumer confidence and restrictions on nonessential business activity.

  • On May 8, the Federal Government announced a 3-Step Framework for loosening COVID-19 restrictions which is expected to be fully executed by the State Governments by July 2020. The First step will allow for hairdressers to be fully operational. However, beauty services will remain closed till the State Government move to step two of the framework. Although not all states are expected to follow this framework immediately, it provides a timeframe of when businesses will be operational. As a result, the Hairdressing and Beauty Services industry is expected to rebound once this framework is put in place by July 2020.

New Zealand

  • Motor vehicle and machine repair businesses are likely to see increased demand for services the longer uncertainty surrounding COVID-19 continues.

  • This closure of nonessential businesses will particularly affect Hairdressing and Beauty Services Industry. Business are expected to reduce the number of employees and wages to maintain margins during these periods of closure. Smaller, less profitable business may exit due to the lack of consumer confidence and mounting operating costs.

  • However, the New Zealand Government has also announced a stimulus package which is expected to support the nonessential business. The package will offer $5.1 billion in wage subsidies for affected businesses allowing businesses to retain staff while businesses are forced to close.

  • On May 14, the Central Government moved to Alert Level 2, allowing the Hairdressing and Beauty Services industry to resume operations. Despite being temporary closed for over two months, demand for hairdressers and beauty services is expected to recover over the next few months, as consumer sentiment improves and disposable income recovers.

  • On April 15, the Central Government announced further measures to support small and medium-sized businesses. The new relief measures include greater flexibility to affected businesses to meet tax obligations, a $3.1 billion tax loss carry-back scheme and $60.0 million in annual savings to businesses each year due to changes to tax loss continuity rules. This is expected increase cashflows to affected businesses and allow them to continue to meet mounting fixed costs, such as rent and insurance.

  • Some New Zealand Banks offering six-month loan repayment deferrals for affected businesses. This is expected to support smaller businesses during this hardship.