Here at BAME Nation, we take an in-depth look at two commercial topics that have been on the radar for the past month. With our short update filled with numbers and analysis, you will be able to develop your commercial acumen. 

 1. The Post-Covid 19 Global Economy:

There are many sides to a post-Covid global economy, but in this article, we want to answer the question, “just how bad is the damage caused by Covid?” 

To answer this question, we will focus on vital statistics that have come up in the press to reflect the state of our global economy. 

Unemployment and recession

The Covid-19 pandemic has devastated the livelihoods of many people. You must have heard news about individual companies making mass redundancies in the thousands. For example, major companies like Renault, BP and British Airways plan to cut 36,000 jobs in total as part of their covid cost-cutting plans. 

Of course, there have been many government plans to cushion the effect of the pandemic on the livelihood of people. Most notable is the UK government’s £80 billion furlough scheme which carters for over 25% of UK’s entire workforce and has prevented UK employers from needing to make mass redundancies by transferring the wage costs of employees to the government. Expectedly, the UK is not alone in the EU with bleak employment figures with countries like France reporting that its unemployment rate is now at a record 23%. 

Across the Atlantic, in US the economic impact of Covid-19 on employment rates have been more stark. Currently, US jobless claims arising from Covid are almost 43m and that number is expected to rise by 1.55m weekly. 

These bleak numbers represent years of economic growth and employment gains being wiped out in a blink of an eye. More importantly, they represent real people and families being affected by the coronavirus. And as it will take years to bring joblessness back down to pre-covid levels and as reports suggest that the global economy will contract by 5.2%, many as are asking, are we heading into another depression? In response, some have argued that with the unprecedented fiscal and monetary stimuli from governments around the world we may stem off the fear of a depression and even though we will not have a V-shaped recovery we should have something not too dissimilar. But here at BAME Nation, we believe the more important question is who will be left out post-covid? As it is more likely that without an inclusive policy response for “ALL” we will have a K shaped recovery where the great divide between the rich and the poor further widens as we slowly realised post-2008

But moving on from the wider social debate about a covid-19 recovery let’s talk about the impact on law firms. For law firms, a global depression will most likely lead to a further and greater disaggregation of legal services in which the client pressure of law firms to become more productive and cost-effective will force law firms to disaggregate their services and outsource legal work to legal process hubs which can perform at lower costs. We suspect that where firms have already done so pre-covid they will now be forced to become more reliant on these hubs where possible. In addition to this, we expect firms to place an even greater reliance on innovation as clients begin to cut spending and force law firms to provide more discounts, write-downs and write-offs. 

In terms of practice areas, a report by McKinsey has suggested that transactional practices areas (which unlike litigation are more correlated with the economy) are likely to contract during the covid-19 downturn. This suggestion is supported by the fact that forecasts expect a 24% fall in eurozone business investments as cash-strapped businesses remain reluctant to use scare money for investments. But as market-capitalisation declines have varied in Covid-19 crisis (think Big tech versus the transport industry) the downturn expected by each law firms may vary according to their client base. In fact, things may appear more nuanced over time. So, if you ever get to discussing the impact of Covid-19 in your interview or application think about the firm’s client base and what that will be mean for the focus of your answer. 


2. A protectionist world:

Many times, when we think of protectionism or trade war, we tend to think of China versus US trade war saga that has been going on for the past two years. But just before we speak of that let us talk about the mounting fear or rather the reality of a rise in protectionism because of the pandemic. 

Currently, according to reports from the University of St Gallen, about 75 countries have introduced some export curbs on medical supplies, equipment or medicines this year. To be honest, it is rather interesting how Covid-19 has brought out the hidden protectionist instincts that had previously been reflected in rising pre-covid economic nationalism. But now some fear that these protectionist instincts may now extend beyond countries fighting for vital supplies in the healthcare sector to more protectionism post-pandemic in other sectors. In fact, a recent survey by the Global Business Alliance indicates that 69% of multinational companies believe that most advanced economies would impose more barriers to trade. 

Such a move would further negatively impact companies which will now have to struggle with disruptions in the supply chain as a consequence of the virus and disruptions as a result of protectionist actions of governments. How far these fears will turn into reality we will know very soon as countries increasingly dismiss the “strengthen our ties” and globalisation rhetoric. 

For lawyer’s fears of protectionism will probably dissuade their clients from proceeding with planned investments as they watch how the political landscape tilts on this issue. In some ways, this is not massively a problem as many companies (unless you are Big Tech or backed by Saudi Arabia) are surviving rather than investing in these times. But over time a reduced number of investments will lead to a reduced number of acquisitions and expansion projects globally and lead to a downturn in Corporate and Banking work. However, as clients will want to prevent their vulnerability to protectionism by negotiating long term purchase contracts, for example, law firms would probably experience an increased demand for risk management services. It will be interesting to see how the fears which seems more a matter of probabilities will develop in the future.  

But for now, lets us return to a more real US vs China saga which is playing out much more interesting than anyone would have expected. Many people will remember when this tit for tat war started two years ago with Trump, amongst many other things, accusing China of bullying American companies and stealing American intellectual property. Then in January 2020 US and China agreed to a truce to the trade war. 

But like every good saga, things have heated up again due to several issues including, who is to blame for Covid-19, China’s security legislation imposed in Hong Kong and US’s increased military activities near Taiwan. Both countries have responded with full force. In US, Trump has threatened to cut off US’s whole relationship with China, US federal government fund has under Trump’s pressure postponed planned investment in Chinese companies, US is planning to further tighten control of Chinese companies listed in US and has curtailed its relations with Hong Kong. While China, in turn, has pressed on with its political plans in Hong Kong and has tried to make diplomatic gains against US by casting itself as a protector of the multilateral order by pledging $2bn in the coronavirus fight and urging the preservation of international supply chains. 

This tit for tat amongst the countries has reflected on many levels. For example, Chinese direct investment into the US has fallen by $1.8bn in the first quarter of 2020. But surprisingly US investment into China has only fallen by $500m. Some have explained that this smaller change reflects the fact that most US companies have invested too heavily in China for them to consider bailing out and as a result, they do not plan to move production and supply chains out of China. But with US increasingly escalating things by for example tightening controls on US companies’ ability to trade with Huawei, one can suspect that some companies are beginning to fear. Their fear is that maintaining two-track Sino-American corporate strategies may become more difficult and that they may need to begin to deepen and diversify supply chains away from China to the rest of the world. Again, lawyers will be at the forefront of managing these risks, changes in supply chains and helping clients navigate restrictive laws that result in this saga. 

There is more we could explore in these articles but to prevent it from being too long we advise you to have a look at these topics too; 

    1. Emerging market debt crisis about which we have written an article that you can read here. This topic will be interesting as we prepare to go into some months of EM bond restructuring. We suspect restructuring may be tougher now than in the past as the creditors are now bond funds who may play hardball a bit harder than banks or governments. 
    2. What central banks are doing to reduce the impact of Covid of which we have written an article you can read here. This topic is back in the spotlight, especially since ECB recently announced that it is adding €600bn to its pandemic emergency purchase programme. 
    3. How will Brexit play out? It is sometimes easy to forget Brexit, but it is still a reality for the UK and their counterparts in EU. In recent news, EU’s Chief Negotiator, Michael Barnier has offered a compromise to UK under which the EU will be ready to review the nature of EU’s “level playing field” demands. You can read more about the update here

Thanks for reading! Have a good weekend and stay well both mentally and physically.  


Daniel Femi-Alemede

Daniel Femi-Alemede

Hello, my name is Daniel and I am an LLB graduate from the University of Exeter. Having just completed the accelerated LPC, I am currently a trainee at a City law firm. I have an assortment of interests from politics to creative writing. A fun fact about me is that I published my first article on a statewide blog at the age of 15.

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