Lockdown – Reflections at the end of week 57

It is a measure of how used we have become to life in the Covid era that this week’s news stories about the virus and its implications have barely raised an eyebrow. From a purely domestic perspective, high levels of vaccination, falling numbers of confirmed cases and Covid related hospitalisations and deaths are so in line with expectations that they have tumbled down the running order for news bulletins. News of India moving onto the travel red list in response to its steepling Covid levels and warnings of a third wave in Britain being to a degree inevitable have been taken in our national stride. Government borrowing in March hitting a record level of £303bn, a number so huge that most of us simply cannot comprehend it, has hardly caused a ripple. The increased freedom as Covid measures have been relaxed has been welcome but largely uneventful. I’ve even managed to get a haircut.

So what have this week’s major stories been about? They’ve been pretty diverse - football, climate change, the George Floyd verdict and the Prime Minister’s texts with James Dyson have all featured. The common element is power, who has it, and how it works. And in that respect, the week has thrown up a few surprises.

For those of you who don’t like football, please bear with me whilst I talk about the ESL episode because it illustrates a lot that has nothing to do with football. For those of you who do like football, I would commend my colleague Dan Billson’s two pieces this week on the whole affair which you can see on our website or via Prettys’ social media. In brief, what happened was that 12 of Europe’s most powerful clubs announced that they were going to organise and participate in their own competition away from the umbrella of the sport’s governing bodies. Outcry followed, from governing bodies, from other clubs, from supporters and from governments and the whole thing fell apart within 48 hours of its first being announced.

The adventure has shown a substantial misjudgment by the 12, and by the leaders amongst the 12 in particular, as to where the balance of power in the business of football truly lies. It seems likely that they felt that their collective strength as entities within the sport and as many of its biggest financial players would enable them to withstand an early adverse reaction and force acceptance of the situation. Ostensibly, for those clubs and their owners, the financial certainties created by the ESL made perfect sense. What pushed them back was the discovery that greater power was elsewhere. Whilst governments and governing bodies flexed their muscles and players and coaches of some of the clubs concerned expressed their lack of support, I suspect that the most decisive factor was consumer power. High level football is awash with cash because huge numbers of people watch it, some paying to do so and some not, and to buy its paraphernalia. This attracts sponsors and advertisers for whom association with football is an important factor in persuading us to spend with them. The potential brand damage of the ESL to football as a whole will have caused sponsors and, potentially, broadcasters to think twice, and, for example, Liverpool are reported to have lost a sponsor over the whole affair. Consumer reaction is likely to have been a key factor in reversing the tide and forcing owners to bow to the principle that it won’t make financial sense if you don’t take key stakeholders at all levels with you.

This week’s global virtual climate meeting between world leaders has been notable for a number of things. Both the USA and China were present, and the USA, under Joe Biden and represented by John Kerry, has taken a stance unimaginable under Donald Trump and provided a lead which others, including our own government, have followed. It would be lovely to think that this is being driven by concern for disappearing Pacific Islands, homeless penguins and the disproportionate impact of climate change on poorer nations, but it’s more likely to be about shifting attitudes amongst the populations of prosperous nations, both as voters and consumers. It is notable that institutional investors are pushing for change. They will see profit in new industries, but will also be mindful that they cannot alienate themselves from consumer choice or risk becoming unattractive homes for, for example, our pensions.

It is notable that institutional investors are also increasingly pressing for diversity, including race equality, much in the headlines following the verdict in the George Floyd murder trial. The decision to prosecute Derek Chauvin and his subsequent conviction feel like watershed moments, although it’s likely to be a step, albeit a significant one, on a long journey. However, this week’s events mark a movement of power away from authorities who seemed immune from being held to account towards citizens who they are, as part of their job, charged with protecting.

And it would seem that in spite of his texts, the Prime Minister was unable to fix a tax break for James Dyson notwithstanding his declared position as First Lord of the Treasury. The lobbying by text because you happen to have the PM’s or the Chancellor’s number has some way to go, but on this one at least, the power of Parliament, which it derives substantially from the electorate, seems to have prevailed.

So in a world where it’s easy to feel insignificant in the face of global corporations and geopolitics, it’s been a reassuring week in which we’ve been reminded that we have both  voice and, with it, a higher degree of influence than we sometimes feel.

Enjoy the sunshine.

Ian Waine leads Prettys’ Corporate Services Team and has advised on a large number of corporate recovery and corporate restructuring cases over the last 30 years. He can be contacted on 07979 498817 or iwaine@prettys.co.uk.

Ian Waine
Senior Partner