Our thinking

No such thing as a free lunch

9 July, 2020

The Government has stepped in to support businesses in  various ways, in order to help the businesses and the people they employ to emerge from the pandemic in one piece. 

And while the furlough scheme, Project Birch and the announcements this week may look like easy money and support on the face of it, as the old adage suggests, exchanges like these are rarely one-sided. 

Whilst there were limited examples of strings being explicitly attached to the early bailouts (despite calls to  act on the opportunity for stricter environmental conditions), this is changing. And, either way, there is an inevitable loss of independence and increase in scrutiny that these businesses face from the public as a result of accepting support. Many business have  come under fire for making huge dividend payments, while having received money from the Government, for example, while on the other hand, several have  repaid furlough money. 

And all of this creates something of a new relationship with stakeholders. If a company uses public money for bailouts, how will public opinion change? What does this mean for investors and will they be able to issue dividends and executive bonuses? Will there be less in the way of other government investment if a business takes a bailout?  

This pandemic is throwing things up in the air in more ways than we could have imagined. As ever, there is more than meets the eye with these changes. 

By Patrick Bapty