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Schumpeter – Covid-19 is foisting changes on business that could be beneficial | Business

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IN FEBRUARY 2014 a strike on the London Underground offered management theorists a lesson in resilience and adaptation. Because the shutdown closed some but not all Tube lines, frustrated Londoners were forced to rethink their commutes to and from work. Researchers at Oxford and Cambridge universities subsequently found that around 5% of passengers stuck to their new itineraries even after normal service resumed. The long-term economic gains of one in 20 travellers adopting new and improved ways to get to work turned out to be greater than the short-term costs of the disruption.

The global covid-19 outbreak presents a far greater challenge to the corporate world than striking transport workers. Profit warnings are spreading nearly as fast as the disease. Analysts at Goldman Sachs, a bank, estimate that earnings growth for firms in the S&P 500 index could grind to a halt. Gauges of business activity, such as purchasing managers’ indices, have cratered in Asia and are expected to weaken elsewhere as the coronavirus crosses more borders. Consumers are spending money on little except sanitary wipes, face masks and tins of Campbell’s Soup. Fears of a pandemic have wiped $7trn off the market value of listed firms worldwide in the past fortnight (see article).

Some companies will, like most of London’s commuters, revert to autopilot once the threat recedes. But for others the interruption will have a lasting effect, accelerating trends in business organisation that were already under way. Two are particularly important. The next few months are set to be a giant experiment in whether new technologies can allow successful mass remote working for employees, speeding up the reinvention of the office. And for firms already worried about rickety supply chains amid a trade war, the virus gives another reason to reconfigure them.

Take employees first. Companies have had to ask themselves whether to let employees travel, attend conferences or even come into the office. In all three cases the answer is increasingly “no”. Many big firms, including Amazon and JPMorgan Chase, have banned all non-essential excursions. Airlines and hotels are reporting steep falls in bookings. Corporate Travel Management, a listed Australian firm that organises business jaunts, has warned the impact could last up to six months. It has slashed its earnings forecast for the year by up to 16.5%. A survey by the Global Business Travel Association, an industry body, found that business travel, which costs companies over $1trn a year (and emits roughly as much carbon as Ukraine in flights alone), could fall by over a third while the epidemic rages.

Large corporate events are being called off. The oil industry’s biggest annual jamboree in Houston and the Geneva motor show will not take place this month. Google and Facebook have given the term “teleconferencing” a whole new meaning by moving a few of their big shindigs partly or wholly online. With Milan and Paris fashion weeks curtailed, Armani streamed its autumn/winter show from behind closed doors. This is bad news for events firms such as Informa, whose share price is down by a fifth since the start of February, especially at a time when many high-profile industry powwows are already losing their lustre.

At the same time more companies are learning to love telecommuting. On March 3rd JPMorgan Chase told thousands of its bankers in America to work from home as it tests its contingency plans. Twitter has asked its 5,000 employees to do likewise. Sony went so far as to shut some of its European offices altogether, just in case. The affected workers are nonetheless expected to toil remotely.

As well as highlighting how bloated some travel budgets are, virus contingency plans may also reveal how inefficiently office space is used. Big British and American firms pay on average $5,000 per employee in annual rental costs. Just 40-50% of desks are actually used during working hours—often not very well. Last year two in five respondents to a survey of 600,000 desk-jockeys by Leesman, a data provider, said their office prevented them from working productively. If their managers now find that productivity does indeed rise—or at least doesn’t dip—as staff self-isolate at home, the case for teleworking may look irresistible. Investors are betting it will. In the past month the share prices of Slack, a corporate-messaging platform, and Zoom, which makes videoconferencing software, have shot up by 18% and 35%, respectively.

The second way in which companies are rethinking their business has to do with supply chains. Since the 1980s these have become more complex and global, with large firms now dependent on thousands of suppliers. The embrace of lean manufacturing and just-in-time delivery of components, pioneered by Toyota in the 1970s, has made production more efficient but more vulnerable to disruption, as companies stockpile fewer and fewer necessary materials. The median firm in the S&P 500 carries only 66 days of inventory, and some have far smaller buffers than even that—Apple has just nine days, according to data from Bloomberg.

When natural disasters strike big companies usually get by, shifting production temporarily from afflicted areas to those that are not. But unlike a flood, an earthquake or even the Sino-American trade war, all of which companies have some experience in planning for, covid-19 could affect all of a firm’s actual and potential subcontractors simultaneously. In such a scenario carrying bigger inventories and having suppliers at home may no longer look wasteful. It may come to be seen as necessary.

Immune response

The coronavirus will not make business travel or lean global supply chains disappear. Chinese factories are cranking up again and high-flyers will, in all likelihood, be back in airport lounges soon enough. But the crisis offers a chance to experiment with new ways of doing things—and to question the wisdom of old habits. Chief executives should not be immune to the opportunity.

This article appeared in the Business section of the print edition under the headline “Plan V”

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British American Tobacco working on plant-based coronavirus vaccine | Business

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British American Tobacco, the maker of brands including Lucky Strike, Dunhill, Rothmans and Benson & Hedges, has said it has a potential coronavirus vaccine in development using tobacco plants.

BAT has turned the vast resources usually focused on creating products that pose health risks to millions of smokers worldwide to battling the global pandemic.

Income subsidies

Direct cash grants for self-employed people, worth 80% of average profits, up to £2,500 a month. There are similar wage subsidies for employees.

Loan guarantees for business

Government to back £330bn of loans to support businesses through a Bank of England scheme for big firms. There are loans of up to £5m with no interest for six months for smaller companies.

Business rates

Taxes levied on commercial premises will be abolished this year for all retailers, leisure outlets and hospitality sector firms.

Cash grants

Britain’s smallest 700,000 businesses eligible for cash grants of £10,000. Small retailers, leisure and hospitality firms can get bigger grants of £25,000.

Benefits

Government to increase value of universal credit and tax credits by £1,000 a year, as well as widening eligibility for these benefits.

Sick pay

Statutory sick pay to be made available from day one, rather than day four, of absence from work, although ministers have been criticised for not increasing the level of sick pay above £94.25 a week. Small firms can claim for state refunds on sick pay bills.

Other

Local authorities to get a £500m hardship fund to provide people with council tax payment relief.

Mortgage and rental holidays available for up to three months.

“If testing goes well, BAT is hopeful that, with the right partners and support from government agencies, between 1m and 3m doses of the vaccine could be manufactured per week, beginning in June,” the company said.

The London-listed company used the announcement to trump the positive aspects of its tobacco empire, saying that “new, fast-growing tobacco plant technology” put it ahead of others trying to develop a vaccine.

“Tobacco plants offer the potential for faster and safer vaccine development compared with conventional methods,” the company said.

BAT said its US biotech subsidiary, Kentucky BioProcessing (KBP), has moved to pre-clinical testing and that it will work on the vaccine on a not-for-profit basis.

In 2014, the tobacco firm bought KBP, which has previously worked on a treatment for Ebola. BAT said its work was “potentially safer [than conventional vaccine technology], given that tobacco plants cannot host pathogens which cause human disease”.


BAT said it had engaged with the Food and Drug Administration in the US and the Department for Health and Social Care in the UK to “offer our support and access to our research with the aim of trying to expedite the development of a vaccine for Covid-19”.

Dr David O’Reilly, the director of scientific research at BAT, said: “Vaccine development is challenging and complex work but we believe we have made a significant breakthrough with our tobacco plant technology platform, and we stand ready to work with governments and all stakeholders to help win the war against Covid-19.

“KBP has been exploring alternative uses of the tobacco plant for some time. One such alternative use is the development of plant-based vaccines.”


BAT said it had cloned a portion of the genetic sequence of the coronavirus and developed a potential antigen. The antigen was then inserted into tobacco plants for reproduction and, once the plants were harvested, the antigen was purified. It is now undergoing pre-clinical testing.

The tobacco firm is more typically on the receiving end of criticism from campaigning groups, including the use young and attractive models to entice younger demographics to try e-cigarettes and vaping technology.

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Almost a fifth of small businesses ‘at risk of collapse within month’ | Business

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Almost a fifth of small businesses are at risk of collapsing within the next month as they struggle to secure emergency cash meant to support them through the coronavirus lockdown, according to research by an accountancy network.

The chancellor, Rishi Sunak, has pledged unprecedented aid to companies to try to cushion the blow from much of the economy shutting down but businesses and politicians have raised concerns that there are gaps in the schemes.

Some 18% of small and medium-sized enterprises (SMEs) either probably or definitely will not be able to obtain additional cash from the government to survive for a four-week period, according to the Corporate Finance Network.

Its accountancy firm members estimated that almost a third of their 13,000 small-company clients from around the UK would be unable to acquire the cash needed to ride out an extended, three-month lockdown.

Rachel Reeves, the Labour MP who heads the business select committee, wrote to the chancellor on Tuesday outlining concerns with the schemes to support companies.

Income subsidies

Direct cash grants for self-employed people, worth 80% of average profits, up to £2,500 a month. There are similar wage subsidies for employees.

Loan guarantees for business

Government to back £330bn of loans to support businesses through a Bank of England scheme for big firms. There are loans of up to £5m with no interest for six months for smaller companies.

Business rates

Taxes levied on commercial premises will be abolished this year for all retailers, leisure outlets and hospitality sector firms.

Cash grants

Britain’s smallest 700,000 businesses eligible for cash grants of £10,000. Small retailers, leisure and hospitality firms can get bigger grants of £25,000.

Benefits

Government to increase value of universal credit and tax credits by £1,000 a year, as well as widening eligibility for these benefits.

Sick pay

Statutory sick pay to be made available from day one, rather than day four, of absence from work, although ministers have been criticised for not increasing the level of sick pay above £94.25 a week. Small firms can claim for state refunds on sick pay bills.

Other

Local authorities to get a £500m hardship fund to provide people with council tax payment relief.

Mortgage and rental holidays available for up to three months.

Those concerns included some banks’ use of personal guarantees in the form of savings and mortgages to secure lending to small businesses under the government’s hastily formulated business interruption loans scheme. She also said that some of the banks offering the government-backed loans were putting in place “punitive” interest rates that made it impossible for companies to borrow money.

“The challenge now is getting the money out of the door to support businesses before it’s too late,” she told BBC radio on Wednesday. “There are many businesses who if they don’t quickly access this cash they are going to go under.

“That will have huge consequences for employment and also our ability to grow the economy when this pandemic has passed. If businesses collapse they won’t be able to ensure our economy can recover. They will be lost for ever.”

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The banking industry body, UK Finance, has said it is running the schemes in line with the government’s design.

In her letter to Sunak, Reeves said the history of support to the banking sector meant they had to step up. The industry and regulators at the Bank of England have said that banks are well positioned to support the economy through the crisis. The banks on Tuesday night agreed to scrap dividend payouts to shareholders after Bank of England pressure.

“Banks were kept afloat by government and taxpayers during the financial crisis,” Reeves wrote. “I would urge them to play their part in helping small and medium-sized businesses through this crisis.”

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Texas ‘mom and pop’ business flooded with orders for helmet ventilators amid coronavirus crisis

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One month ago, Chris Austin was running a little-known mom-and-pop business in Texas that fielded a few dozen orders a week for his helmet-style ventilation devices.

He had five employees and a handful of volunteers from the family’s church who would pitch in at the workshop behind their home in the small town of Waxahachie.

Then the coronavirus epidemic hit.

Austin’s company, Sea-Long Medical Systems Inc., is getting thousands of orders every day, from America’s top hospitals to countries as far flung as the United Arab Emirates. Researchers say the device, which costs less than $200, could help hospitals free up ventilators for only the most critically ill coronavirus patients.

“‘Overwhelmed’ doesn’t scratch the surface,” Austin told NBC News.

Sea-Long Medical Systems helmets resemble crude spacesuit helmets, with transparent hoods sealed at the neck and two tubes extending from the base.Sea-Long Medical Systems

The demand for the Sea-Long helmet underscores the dire shortage of ventilators in the U.S. and around the globe fueled by a surge in hospital patients suffering from COVID-19.

In the last few weeks, hospitals have been flooded with patients experiencing respiratory problems so severe they need the help of a machine to help them breathe.

Governors have made impassioned pleas for more equipment. Companies like General Motors and Ford have redesigned their assembly lines to produce the lifesaving devices. And hospital executives are scrambling to snap up any equipment that might help ease the escalating crisis playing out inside their facilities.

The Sea-Long device doesn’t look the part of a lifesaving medical device. It resembles a crude spacesuit helmet, with a transparent hood sealed at the neck and two tubes extending from its base. The helmet was originally designed to supply oxygen to patients receiving treatment in hyperbaric chambers.

But doctors in Italy, where a version of the helmet has long been used to treat people experiencing breathing problems, found it to be effective in helping some COVID-19 patients.

Dr. Bhakti Patel, who has been studying the devices for four years, said they hold promise as an early intervention that could spare respiratory patients the need to be put on the more traditional — and costly and invasive — ventilators.

“I would love for there to be a silver bullet for this pandemic,” said Patel, a pulmonologist at the University of Chicago. “My best hope is that the way it changes the game is that maybe it shaves off the number of patients who need a ventilator — even if it’s 1 out of 3 or 1 out of 5.”

“If that is the case,” Patel added, “that would be a game changer when we’re seeing this tidal wave of patients who need a ventilator.”

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Patel led a first-of-its-kind study in 2016 that tested the Sea-Long helmet against an oxygen mask for a group of 83 intensive care patients suffering from acute respiratory distress. The researchers found that the helmet led to superior outcomes: Patients using them required ventilation 18.2 percent of the time, compared to 61.5 percent for the masks, and had a better 90-day survival rate, according to the study, published in the Journal of the American Medical Association.

The trial was stopped early because the helmets proved more effective than the masks, resulting in a smaller sample size than originally intended. But Patel believes the device could lead to a sea change in intensive care units that have long relied on traditional ventilators. Those devices require doctors to fully sedate patients and insert a tube into their windpipes, a process that can cause pneumonia and other problems when used for extended periods of time.

“If we take away the ventilator — which comes with this package of sedating people, making them not move, making them sort of not have memory of what’s happening — perhaps we could spare some patients some long-term complications,” Patel said.

At $162 apiece, the Sea-Long helmet costs a tiny fraction of the five-figure ventilators.

The original devices were made to run through ventilators. But working with Patel and her mentor, Dr. John Kress, Sea-Long has modified the helmets so they can be hooked up to a hospital’s regular oxygen supply, keeping the ventilators free for those who need them most. They have also made another significant modification, adding a viral filter to prevent possible COVID-19 exposure to others.

This week, the team at the University of Chicago Medical Center used the helmet on one coronavirus patient and has gotten encouraging results, Kress said. The facility has received 20 of an expected 100 helmets and is planning to use them on additional patients, the doctors said.

Chris Austin, fourth left, says his team has been working around the clock for the past several weeks.NBC News

Other companies make similar ventilator helmets, but Sea-Long’s is the only helmet available in the U.S. that meets requirements of the Food and Drug Administration and has been validated in a clinical study for acute respiratory syndrome. No studies have yet been done, however, examining the effectiveness of the devices in treating COVID-19 patients.

Austin’s team has been working around the clock for the past several weeks. The workforce has at least doubled to more than 10 people, Austin said, and volunteers have been showing up in droves.

“We have people showing up that we don’t even know that say: ‘We’re here to help. What can we do?'” Austin said. “They don’t ask for anything. They don’t expect anything. They just say, ‘Whatever you want me to do, we’ll do it.'”

“It just about brings tears to my eyes,” Austin added.

The attention has led to some other acts of extraordinary generosity.

Austin said he recently got a surprised call from Virgin Galactic CEO George Whitesides offering to help him produce more devices.

“Chris, I saw what you do, and we want to help,” Whitesides said, according to Austin. “Whatever it takes.”

Austin told him he needed more machines to manufacture the devices but didn’t have the cash to pay for them. Later that day, Austin got a call from his New Jersey-based supplier.

“Somebody just paid your bill,” Austin said he was told. “They’ll be shipping tomorrow.”

With the four additional machines, Sea-Long expects to produce thousands of helmets a week. The goal is to produce 50,000 per week.

“This is the classic sort of American story,” Patel said. “It’s the little engine that could.”

Download the NBC News app for full coverage and alerts about the coronavirus outbreak

James Vanderploeg, Virgin Galactic’s chief medical officer, said the company is working with Sea-Long “to help them expand their capacity, helping with recruiting additional people and getting equipment in place and helping with the logistics and so forth — anything we can do to help them expand their throughput.” Virgin Galactic is also modeling potential prototypes for its own design of helmets used for ventilation, Vanderploeg said.

Major U.S. medical centers are now stocking up on the helmets, including Massachusetts General Hospital and the Hospital of the University of Pennsylvania. Austin said he’s also received orders from Canada, Mexico and several countries in Europe, including hard-hit Italy.

A Mass General spokesperson said the hospital has ordered five Sea-Long helmets but has not yet received them.

A Penn Health spokesperson confirmed that the hospital has ordered the devices.

With so much of the world in need and so many orders coming in at once, Austin has faced a difficult question: Whom to prioritize?

“We really look at where is the need,” Austin said. “We know New York has a stronger need. We know Boston. We know Chicago. … But we also know that we have to get what we can to Italy.”

For now, the company is shipping only a limited number helmets per order, “because we still can’t afford the volume of a huge order,” he said.

Amid the worsening pandemic, Sea-Long isn’t planning to raise the price in part because it doesn’t want to limit who has access to the devices.

“This probably sounds sappy,” Austin said, “but we think of what if that was our son or daughter or grandfather sitting there in that bed gasping for air and we have to explain to him: ‘I’m sorry. We don’t have anything for you.'”

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