Coronavirus boosted the tech industry’s fortunes – will the recession undo it?
The upheaval caused by COVID-19 has taken a new turn as GDP shrinks 20.4%
There’s nothing quite like being hit by a terrible inevitability. We all knew the coronavirus pandemic would eventually infect the economy as well as the people of this country, but news of the deepest recession since records began still stopped me in my tracks a bit this morning.
In the immediate aftermath of such news, it’s hard to see where the trends lie, although I’m sure economists and business analysts are already poring over the data trying to figure out exactly that.
What makes it more difficult is that this is, to use that now horribly tired phrase, an unprecedented situation. The Black Death, Plague of Justinian, and so on offer little insight for our plight now, having taken place in a far distant past in an economy and society radically different to our own.
The 1918 Spanish Flu pandemic is more recent and took place in a society and economy far more similar to our own. However, its economic effects are muddied by the fact it took place in the final stretch of the First World War.
So here we are, in uncharted territory, without history for a guide. And for the tech industry, the situation is made more unclear by the initial effects of COVID-19 on business actually gave it a boost.
While the hospitality and restaurant industries took an immediate and devastating hit, office-based organisations were able to move to mass remote working to keep their operations ticking over.
Similarly, while retail also took a hit, it was softened by consumers moving to online purchasing. All of this ‘new normal’ was underpinned by technology – it led to a dramatic boost in the use of video conferencing and collaboration software, for example. Even hardware was boosted, as newly remote workers had equipment sent to them.
But if GDP continues to decline and the recession drags on, these same tech businesses could feel the impact hard. If office-based businesses start to tumble and fall too, then their newly boosted customer base could disappear just as quickly as it arrived.
While multinationals like Microsoft, IBM, Amazon and the rest will doubtless muddle on, SMBs and startups could find themselves also falling victim to the COVID-recession double whammy.
Yes, recessions can sometimes prove fertile ground for startups, but often they arise from the rubble of an economic collapse – which means the bad times have to come first.
The world has been fundamentally changed by the coronavirus pandemic. Even when a vaccine becomes available, people may be reluctant to give up the few upsides of the pandemic, like home working, or to re-embrace long, tedious commutes – all of which have been enabled by tech.
Whether this way of life and model of business can be economically viable, however, remains an open question, and that puts even the newly bolstered tech industry on uncertain ground.
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