New risks emerge as many come to grips with the spread of new COVID variants  

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Personal, professional and family concerns are each below the 40s in our COVID concern indices. Family and personal concerns are slightly higher than they were two weeks ago, but the panel is still much closer to being ‘not worried at all’ about the risks of COVID-19 than they are to being ‘extremely worried’. Indeed, most of those on the panel are fully vaccinated, and many of their family members are starting to receive the jab as well, which is making them feel much safer about the risks. 
 
However, there are external factors that might increase concerns down the road. For example, some are feeling worried about the risks from the ‘Indian’ COVID variant. 
 
The biggest professional concern is linked to labour market pressures, and if the government support packages suddenly stop, a few are fearful that the UK economy could be in for a rude awakening.  


 

Turning it around – many covenants are stronger since the start of the outbreak 

 
Close to half (44%) of pension professionals report that their covenant has not changed since the start of the pandemic, and there are signs that levels sponsor covenant strength are in a much better place than at the onset of the pandemic. For example, 28% of schemes now say their covenant is stronger, which is an all-time high for the series. 
 
An equal proportion of schemes say their sponsor covenant has become weaker, but this is still low when we compare this figure to earlier points in this series. 
 
The country is opening up again and fortunately the economy is starting to churn, but the benefits are not being felt equally by everyone. This could pose some problems for schemes in the future if the fortunes of weaker sponsor covenants do not improve soon.   

Panel urges vigilance as Whitehall struggles to prepare for looming threats on the horizon      

 
Close to two-thirds of our COVID research panel is ‘somewhat worried’ by the government’s pandemic guidance, while the rest report not feeling worried at all. The government is clearly perceived to be doing a much better job handling the pandemic than last year, and many panel members applaud its vaccination campaign, science-led approach to lockdown and phased reopening of the economy. 
 
Nevertheless, some warn that the government is starting to become rather lax, as another common concern among panel members is about rising risks from new variants of the disease, especially the one first identified in India. Westminster would do well to learn from its past mistakes and avoid falling into complacency, our panel suggests, feeling that the best way they can do this is by executing a coherent plan for handling international travel and tracing the risks of new variants from abroad. 
 

Dim prospects for international travel due to new variants   

Most of our panel are already visiting friends and family. They also think we can safely expect to go back to the pub or see colleagues in person by next month. 
 
However, the panel is less optimistic about international travel, arguing that it would be much safer if we practised patience going forward and did not start holidaying abroad until early next year. 
 
There was a time when the panel thought we might be able to travel by the end of this year, but that is no longer the case. One of the biggest drivers behind this is the aforementioned rise in new COVID variants. Another pressing concern are the dangerously low vaccination rates in other countries. 
 
Further to these timelines, our panel caution that we should not expect to: 
 

 

Reopening is benefitting sectors that struggled during pandemic    

 
The British economy is starting to recover after a tumultuous year under COVID-induced restrictions. This is welcome news for everybody, but the pace of recovery will not be evenly distributed. Just as the pandemic positioned some key industries as winners and others as economic losers, we expect to see similar divisions during this period of renewed growth. 
 
For example, fortunes are reversing for information technology (IT) and communication services, leaving healthcare as the key beneficiary. We attribute this outlook to the recent volatility in equities markets over rising concerns about inflation, which in turn triggered a mass sell-off by nervous investors. 
 
Nevertheless, our panellists still believe that each of these industries will remain winners, but they are more confident about the prospects for healthcare moving forward. Indeed, 95% say that this industry is going to be an economic ‘winner’ compared with only 84% that say the same for IT or communication services. 
 
We also see interesting upward movement further down our indices across real estate, industrials and materials. Throughout this series, these sectors were the biggest losers of the pandemic, yet they are now starting to bounce back. If these new trends continue, our panel may be more neutral in their outlook for these industries going forward. This is already the case for materials, which is currently in the midst of an economic boom thanks to strong demand for commodities like iron ore and copper.       


Is your sponsor covenant part of an industry positioned to thrive in the post-lockdown economy? Click here to tell us in our bi-weekly survey. 
 
 
Previous articles in this series: 
 
05/05: COVID concern indices dip to all-time lows as most covenants are left unchanged by the pandemic 
20/04: A silver lining – economy likely to hit pre-pandemic levels in 2022 
07/04: Professional COVID concerns plummet to all-time lows 
25/03: Covid concerns are down, but new risks emerge 
11/03: Concerns over the pandemic’s lasting impact on the world of work are growing 
24/02: Pension professionals urge caution as vaccination efforts continue 
12/02: High vaccinations rates bring down COVID-19 concerns 
27/01: COVID-19 concerns at an all-time high 
13/01: New COVID-19 strain makes pandemic spiral out of control 
15/12: Another COVID summer on the cards despite vaccine rollout 
02/12: Divergent COVID-19 concerns show different realities 
18/11: The risks and consequences of COVID-19 complacency 
04/11: Sharp rise in COVID-19 concerns before the second lockdown in England 
22/10: COVID-19 outbreak to last at least until June 2021 
07/10: Prolonged COVID-19 outbreak is putting pressure on covenants 
23/09: How will the second COVID-19 wave impact UK schemes? 
17/09: Trust in UK government dwindling due to COVID-19 
26/08: Another step in adjusting to COVID-19 uncertainty? 
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: 
 
 
Expected minimum duration of outbreak: 
 
A methodology change took place on 06/10/2020, affecting data from 20/10/2020 onwards. 
 
Prior to 06/10/2020: 
 
 
Following 20/10/2020: 
 
 
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: 
 
 
Following 15/04/2020: 
 
 
Macro rates index: 
 
 
Sector sentiment index: 
 
 
Concerned about the coronavirus outbreak and its macro implications? Click here to take part in the bi-weekly COVID-19 survey. 

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