As some elements of lockdown are relaxed, businesses are looking forward to resuming trade. But the path we are on is towards the ‘new normal’ and it would be wrong to assume any business can enjoy conditions similar to those before the pandemic struck. The world into which we are emerging is very different to the one we have left behind and some of the repercussions of Covid-19 could remain with us for many years.
It is therefore vital that all businesses take a fresh look at their operations, markets and goals as good strategic planning, development and execution are going to be essential for success. And understanding the new structure of markets, be they global, national, regional or local, is going to be key to business performance. Good examples of this are provided by recent moves in international currency and commodity markets.
Since January, Sterling has weakened against both the US Dollar and the Euro. This is good news for UK exporters as their goods will be more competitive and they may be able to build market share. But this move in exchange rates is not so good for anyone buying products or services from abroad, as the cost of these could now be higher and domestic substitutes may not be available.
Meanwhile, commodity prices are also being influenced by market forces, and the oil price has weakened significantly as supply has greatly outstripped demand. Obviously, a lower global oil price is beneficial to consumers, as petrol prices fall, and that can help keep overall inflation contained. Here in the UK, headline inflation fell to a level of just 0.8% in April.
Lower prices for oil, and other necessities, can also leave a larger share of household budgets available for more discretionary types of spending, and that is important for small and medium sized businesses. But in economies such as Scotland, where the oil sector is important, the lower price can leave a large share of production unprofitable, reducing investment, activity, employment and related services, and this can impact businesses in many other sectors. Even small domestically focused businesses can easily find themselves affected by events in international markets.
This is a fast-moving situation and the views, opinions, information and data contained in this newsletter may change as subsequent conditions vary. Although all information used in this publication has been compiled from sources believed to be reliable, it has not been independently verified. This newsletter is for information purposes only.
This Economic Update document has been produced for Dundee & Angus Chamber of Commerce by Dr Shona Dobbie, Angus Economics
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