Another step in adjusting to COVID-19 uncertainty?
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COVID concern indices are down this week, with personal worries retreating the most (by 18%). Only 28% in our COVID research panel are ‘very’ to ‘extremely’ concerned about the UK government’s handling of the coronavirus outbreak, down from 41% last week – a level which was stable through most of July and August. The outbreak is still expected to last until the end of January 2021. Signs of a second wave have not subsided, so are UK pension professionals coming to terms with COVID-19 uncertainty?
Stuck between the old and new ‘normal’
A new source of uncertainty has emerged in the comments in our weekly survey. Many feel they are in a limbo between the old and new ‘normal,’ not knowing what further changes to expect and unable to plan ahead:
- Interpreting the COVID-19 safety guidance has not become any easier or clearer, but the responsibility on individuals to apply it correctly is significant
- The effectiveness of current infection control is also unclear, given that infection rate data is not shared regularly and trusted by the public
- Changes in the behaviour of the public are emerging – some are more cautious, while others are more indifferent to the virus, but whether these behaviours continue remains to be seen
- Growth in inequalities may increase further, with the pandemic having disproportionately negative effects on disadvantaged members of society
- Staff returning to the office is a topic still up for debate – some are making a controlled attempt, while others are holding off and only making the office available for those who need it
- Students returning to school are worried about the safety measures, and the issue with A-level results has only added to their and their parents' anxieties
- The safety of care homes has not been in the media in recent months, but those whose parents are in care homes are still concerned for the health and wellbeing of their family
- The ability to attend in-person events and networking is still limited by public transport concerns and doubts about their effectiveness with social distancing and face masks
- Uncertainty around other activities previously taken for granted is still high – staying at home and not going on holidays, or not attending weddings or funerals is increasing isolation and placing growing pressures on mental health
Uncertainty may slow down economic recovery
The expected duration of the macro consequences has decreased by 12%, suggesting that economic activity may return to pre-pandemic levels by mid-September 2022. The pension industry’s focus remains on the strength of sponsors – 55% now report a somewhat to much weaker covenant since the beginning of the crisis, compared to 41% last week and similar levels prior to that. With many industries on government support, the pressure on the Bank of England and UK government to contain the economic fallout is substantial.
Fiscal, inflationary and regulatory pressures are building. 69% think taxes will increase to pay the unprecedented stimulus bill – a proportion which has remained steady over time. However, 38% now think interest rates may rise, compared with 22% last week. Similarly, 79% expect inflation to increase, up from 56%.
As a result, 48% now view the financial sector as a potential ‘loser’ post pandemic, compared with 30% in last week’s survey. Meanwhile, the outlook on industrials and materials has become more neutral, possibly reflecting their recent performance.
What are the key risks to the economic recovery post-COVID? Click here to tell us in next week’s survey.
Previous articles in this series:
- 19/08: COVID-19 outbreak to last at least until February 2021
- 12/08: Trustee sentiment around COVID-19 pandemic deteriorates
- 05/08: Relaxed attitudes towards COVID-19 threaten economic recovery
- 29/07: Does COVID-19 mean the ‘end of the world as we know it’?
- 22/07: COVID-19 could weaken covenants and raise taxes and inflation
- 15/07: COVID expectations set, except for economic recovery
- 08/07: COVID concerns rise as economic outlook improves - why?
- 01/07: Lockdown easing raises COVID concerns
- 24/06: The UK government’s COVID-19 guidance attracts criticism
- 17/06: COVID concerns shift to life after lockdown
- 10/06: Will lockdown easing cause COVID concerns to rise?
- 03/06: COVID concerns at an all-time low – is the worst over?
- 27/05: Personal COVID concern subsides – but this may be a problem
- 20/05: UK pension trustees worry there may be no ‘going back’ after COVID
- 13/05: UK pension schemes don’t trust the lockdown exit strategy
- 06/05: Concerns over duration of COVID lockdown and macro effects intensify
- 29/04: Professional COVID concern spikes by 18% as trustees brace for a longer lockdown
- 22/04: Macro effects of COVID to last until 2022, with personal concerns up by 10%
- 15/04: COVID concerns fluctuate – there is no path to normalisation in sight
- 08/04: The magnitude of COVID’s economic impact remains unclear
- 01/04: Have UK pensions schemes settled into the ‘new normal’ of COVID-19?
- 25/03: Rising levels of concern about COVID and a changing economy
- 23/03: What do pension funds think about the economic impact of COVID-19?
- 19/03: COVID-19: Government response divides pensions community
- 18/03: 96% of pension funds and trustees preparing for a long-term COVID-19 fallout
- 18/03: mallowstreet Flash Insights Report: COVID-19 – what’s on trustees’ minds
About the COVID Concern Index
This short survey helps gauge sentiment of our community on the pandemic. The results are distributed via the community newsletter. Until 31/08/2020, this was a weekly survey. From 01/09/2020, the survey shifted to a bi-weekly cadence.
The COVID Concern Index values should be used as indication only and do not constitute advice. Their values are bound by the choices available in the survey on which they are based.
COVID Concern Index:
- 0 = respondents are not worried at all
- 100 = respondents are extremely worried
Expected minimum duration of outbreak:
- Lowest possible value = 1 month
- Highest possible value = 6 months
Expected minimum duration of macro effects:
A methodology change took place on 15/04/2020, affecting data from 21/04/2020 onwards.
Prior to 15/04/2020:
- Lowest possible value = 3 months
- Highest possible value = 12 months
Following 15/04/2020:
- Lowest possible value = 3 months
- Highest possible value = 60 months
Concerned about the coronavirus outbreak and its macro implications? Click here to take part in the bi-weekly COVID-19 survey.
