In time, today’s crisis may lead to some corporate resurrections—and plenty of new births
-19 pandemic is having a significant impact around the world,” warned Fred Smith, boss of FedEx, at his firm’s earnings conference on March 17th. That is putting it mildly. The express-delivery giant announced that it was slashing its delivery capacity and, for the first time ever, refused to give earnings guidance. While economists debate whether this recession will be short-lived or sustained , bosses the world over already see mayhem.
Many companies will pull through. Governments are rushing in to ensure as many as possible do. Britain this week unveiled a £330bn package of loan guarantees and other support for businesses. America’s Federal Reserve earlier said it would create a new funding facility to provide liquidity to American issuers of commercial paper. President Donald Trump has called for $1trn in economic stimulus.
Oil companies in particular have been clobbered by the steep fall in the price of crude, which sank to $25 a barrel on March 18th, the lowest level in nearly two decades. Morgan Stanley calculates that the median exploration and production firm needs an oil price of $51 a barrel to break even. Saudi Aramco, the world’s mightiest oil colossus, said it might cut capital spending by up to a quarter this year. America’s ExxonMobil echoed that it will make “significant” cuts.
That is bad news for industries like the arts, which depend on a few big, one-off events—at least in countries like Britain, where state-funding of the arts is less lavish than in France, Germany or Gulf sheikhdoms. Art Basel Hong Kong was cancelled last month. The main Art Basel fair in Switzerland, which is due to open on June 18th, may also not go ahead. Galleries that depend on such fairs, as many do, could see as much as 80% of their sales evaporate.
This boomlet will probably not last. Early panic will inevitably die down. Other industries may prosper for longer. By forcing many people to work, shop and amuse themselves at home, the crisis may give a permanent boost to online companies. Zoom, Microsoft Teams, Slack, WeChat Work and other corporate-messaging services are experiencing a surge in demand. Data from Sensor Tower, an analytics firm, suggests that weekly new users of such apps leapt from 1.4m in early January to 6.
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