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:
- Attend a family gathering until June
- Hold in-person meetings until July
- Attend in-person events or work from the office until September
- Travel abroad until February 2022
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
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:
A methodology change took place on 06/10/2020, affecting data from 20/10/2020 onwards.
Prior to 06/10/2020:
- Lowest possible value = 1 month
- Highest possible value = 6 months
Following 20/10/2020:
- Lowest possible value = 1 month
- Highest possible value = 12 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
Macro rates index:
- -100 = all respondents think rates will fall
- 0 = all respondents think rates will stay the same
- +100 = all respondents think rates will rise
Sector sentiment index:
- -100 = all respondents think the sector will be a ‘loser’ in the pandemic
- 0 = all respondents see a neutral outlook for the sector
- +100 = all respondents think the sector will be a ‘winner’ in the pandemic
Concerned about the coronavirus outbreak and its macro implications? Click here to take part in the bi-weekly COVID-19 survey.