Analysis of the latest announcements and figures leaves our team questioning whether opportunities for a more sustainable future are being missed.


The true scale of the economic havoc caused by the pandemic is coming to light with countries across the world starting to report their Quarter 1 (Q1) Gross Domestic Product (GDP) figures. Although this is no surprise, it still doesn’t make for pleasant reading and the worst may still be to come.

The Eurozone has seen GDP drop by -3.8% in the first quarter, with France reporting a decline of -5.8%, Spain a fall of -5.2%, Belgium -3.9% and Austria -2.5%1. With reports of this sort of economic data, and lockdowns coming into force across the world towards the end of the Q1, it is likely that the data we are seeing presently is merely the starter for what will be considerably worse in Q2. Some forecasts are predicting falls of -21.7% In Japan for Q2 and the US by c40%2. It is worth noting that these are just forecasts at the moment and heavily dependent on how the lockdowns are slowly eased as well as the effectiveness of central bank stimulus. Central banks have acted quickly and with significant firepower, and we expect their intervention to continue for some time.

Crossing the pond, and the US has seen a contraction of -4.8% in GDP3 in Q1. This is coupled with an unemployment figure that now stands at over 30 million people, meaning that it isn’t difficult to understand that closing down entire economies is beyond detrimental.

The next phase of the response to the pandemic may be the trickiest one yet. With death rates slowing across the world4, the slow unwinding of lockdowns and restarting of business and ‘normal’ life will be akin to playing a game of 4D chess whilst blindfolded. In the UK the perennial new father, prime minister Boris Johnson, addressed the nation, telling us that we are past the peak of the outbreak and to assure us that a ‘comprehensive plan’ on easing lockdown is in place5.

Things might appear worrying at times, but across the world the finest minds are focused not only on trying to secure the economies, but on seeking vaccines and solving the problems that are ahead of us. Our faith in human resolve and ingenuity continues to provide us with hope.

There is the potential for positive change in the wake of the devastation wrought by the virus. Whilst many are yearning for a return to normality, others wish to improve upon normal and move towards a less carbon-intensive future. However, those who were hoping that the government might exercise its influence by attaching environmental conditions to bailout payments were dealt a blow this week. The low-cost airline EasyJet was given £600m to ease the pressure brought about by coronavirus without having to commit to lowering emissions6. Aviation is one of the most carbon-intensive forms of transport and the increase in passenger numbers as a result of low-cost flights has seen the sector grow and associated pollution levels rise7. Though businesses must be given a helping hand during this time of crisis, to prevent further social and economic consequences of the pandemic, it is short-sighted not to exercise influence over how the bail-out money is used. We believe that encouraging businesses to contribute to sustainable development should be a key part of the coronavirus recovery plan for companies, and yet the goal of net-zero emissions by 20508 seems to have fallen by the wayside when it comes to recovery planning.

Alongside the potential for government to use its role as an important stakeholder to urge businesses to become greener, there is growing pressure for other limits to be placed on bailouts. Denmark and Poland have become the first countries to say that companies making use of tax havens should not receive help from the government9. The organisations that seek to limit the payment of domestic business taxes reduce funds available for vital public goods and services. As a consequence, it seems sensible that such companies should be required to relinquish offshore tax breaks before receiving a crisis loan. There are no signs yet that the UK will follow the example of Denmark and Poland9. Again, this seems like a missed opportunity to influence businesses and improve corporate governance.

It is clear that stimulus is needed to alleviate the effects of the financial crisis induced by COVID-19. What is also evident is that a short-term focus will not help us solve the issues that were present before the pandemic. The government has the opportunity to steer corporations towards better behaviour for the long-term benefit of society, it would be a shame to let it go to waste.

Your Holden & Partners team have adapted very well to new ways and locations for working, and are, as always, available should you require us.


1 https://think.ing.com/snaps/eurozone-enters-historically-steep-recession-as-gdp-plunges-3.8-in-1q/

2 https://www.fxstreet.com/news/japan-gdp-to-shrink-22-in-q2-in-biggest-postwar-drop-nikkei-forecast-202004302308

3 https://www.poundsterlinglive.com/economics/13200-u-s-economy-historic-4-8-gdp-contraction-spells-trouble-for-rest-of-world

4 https://www.independent.co.uk/news/coronavirus-deaths-curve-cases-global-covid-19-chart-a9492141.html

5 https://www.itv.com/news/2020-05-01/boris-johnson-promises-comprehensive-plan-on-easing-lockdown/

6 https://www.theguardian.com/business/2020/apr/30/transport-secretary-promised-easyjet-not-to-levy-green-taxes

7 https://www.aef.org.uk/issues/climate/

8 https://www.gov.uk/government/news/uk-becomes-first-major-economy-to-pass-net-zero-emissions-law

9 https://www.businessinsider.com/coronavirus-companies-tax-havens-banned-denmark-poland-bailout-2020-4?r=US&IR=T


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