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Has Life Changed That Much

Veteran international investor John Corey comments

Does this quote from ‘The Beeching  Cuts’ sound reasonable during the COVID-19 pandemic? “First, the industry must be of a size and pattern suited to modern conditions and prospects. In particular, the railway system must be modelled to meet current needs, and the modernisation plan must be adapted to this new shape and with the premise that the railways should be run as a profitable business.”

Ridership has crashed and the operating companies are being paid by the taxpayers to keep the trains moving. Some commuters are unable to work from home and they are using public transport. Others who are travelling to work have switched to cars or other means of travel, which they feel is safer for them. Based on the present numbers, none of the rail companies can afford to operate as a commercial venture. They need massive cuts in their cost-base to right-size the services. Doing that will make the Beeching right-sizing seem like a minor adjustment. The quote above was the PMs instructions to the Beeching committee in the 1960’s. The reason the UK was over-committed to rail was the side effect of workers shifting to travel by car. Some shifts result in a permanent change.

Get real
On Radio 4 recently, the co-founder of Pret, who is currently the CEO of the fast-casual food chain, said that the Government needs to get people “back to work”. Is there any evidence that people are not working? His business caters to office workers who buy lunch or an evening meal from his shops. Many people are working without the need to be in an office. Employers are mainly happy with the output. The speaker lost the plot for what it means to be an entrepreneur.

I wrote earlier this year about a new normal. We need to think about how life will function now that the rules have changed. Rather than hold your breath waiting for things to come back to 'normal', accept that we are already in a new normal.

Who exactly will be using office space in the future is unclear. The present tenants are likely on longer-term leases so they will continue to pay rent while they operate a more virtual office environment. Social distancing requires more space per person. A business in the financial services sector needs computers more than it needs people to co-locate. Having healthy workers that can do the job is the goal. It sounds nice to support the national sandwich chains; that is never going to be a priority if the support causes more of the staff to become ill. Think about how many people would need to queue for a lift to go out and then return from a sandwich run? Remember, you might only be able to share an elevator with 1 or 2 other people if they wear masks and everyone stays one metre apart.

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