COVID-19 and the industry

I'm a boss, an employee, a human being. I'm a son who can't see his parents, a grandson who can't see his grandfather. I'm the "YouTube guy" and I run a small company that at the beginning of the year had 16 employees.

This is above all an economic analysis of the COVID-19 / coronavirus outbreak. I'll leave the health analyses to the experts in the field. It's a very real and very serious health problem that has taken us all by surprise.

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HISTORY

In 2018 we were growing fast and 2019 was by far our best year. The country was growing, the markets we worked in were stable.

I invested. I invested in facilities, machinery and human resources. In January 2020 everything looked promising and there were short, medium and long-term plans for the company. We had our best January ever, I paid off a loan and paid for some of the machines I bought. I knew it would be tight, but I would save the interest. It seemed like a good medium-term bet.

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CURRENT

February arrives and the panorama begins to change slightly. Although it didn't break, I felt for the first time that something wasn't right, that there were fears in the market. "All right," I thought. "There is some fear on the part of companies, but this won't be serious, it will pass."

Well, how wrong I was! The first week of March saw the sharpest drop. And suddenly everything stopped. The phone stopped ringing, the emails stopped arriving. Orders that we knew were certain were postponed. Orders we already had were cancelled.

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We phoned and emailed long-standing customers or those who order at this time of year. They're closed, in cost containment or waiting to see what will happen. And then the government orders the closure of schools and thousands of people go home.

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Two weeks later, we're just over halfway through the month and the days aren't looking good. My workforce is at a standstill, we spend hours looking at each other with little or nothing to do in almost every section.

Whoever needed to go home to be with their children did. Those with contracts close to their renewal date have been informed that they will not be renewed. Whoever could take a holiday did. We have a skeleton crew at work, with various contingency measures to reduce risks.

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We have closed suppliers, we have practically no clients. All the machine development we did last year turned against us. Today we work faster in screen printing, direct printing and embroidery, which means it takes us much less time to run out of work. It's a well-oiled machine - today, unfortunately.

Could we close? Yes. But we still have a week's work to do and we need to despatch the goods in order to receive payment. If we close down, the costs remain the same, but the little money we still receive disappears.

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FUTURE pt.1

Those who know this point to the end of April / beginning of May as the peak of the outbreak. The beginning of May is in a month and a half. 1 and a half months to get BAD. Because this isn't bad yet, you see. Companies are closing down, people are terrified and it's only going to get worse.

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"This is the fight of our lives," you hear everywhere. It really is. It's the fight for physical survival in the first phase and the fight for psychological and economic survival in the second.

"We have to stay at home". I agree. We do! We have to close doors. But we can't. They won't let us. They don't give us solutions that allow us to close our doors. The state itself doesn't have the financial means to implement a quarantine for the whole country at this stage.

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Those who close their establishments have three options. Put everyone on holiday (which doesn't solve the problem), pay wages in full (if you can) or sack them.

There are no good solutions. Nobody wants to lay off part of the workforce, the people who have helped us get to where we all are. These people deserve more respect.

But we need to think about the good of everyone, not just a few. And as difficult as it is to put on the table, it has to be there. Because if the company closes, everyone is out of work.

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APOIOS FINANCEIROS

From the government - to companies - the measures come in trickles. Every day there's something new, a change. But nothing that will help us in the short term.

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There will be a line of support (credit) with high interest rates that companies will only be able to access in two months' time. In our case, I can get loans outside the helpline at lower rates. I know of similar cases. I've already called them, but they won't arrive in time either.

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Contribution payments will be postponed to another time of the year. Something that helps in the immediate term but will be in the way when (if) companies start trying to get on their feet.

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There will be a simplified lay-off. This is the only measure that will - in fact - help companies' cash flow. It will arrive in 60 days.

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With the exception of the lay off, which will actually help companies to stop the bleeding (as well as families, who will be able to keep their jobs), all the other measures are a postponement of costs (postponement of contributions) or an increase in debt (loans) at high interest rates for companies.

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When we're fighting for the survival of the company, we need to take a lot into account and there are cuts that need to be made very quickly.

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TIME AND MEASURES

Time is our greatest enemy at the moment. The longer we let it go on, the worse. What's the point of staying at home for 15 days if you come back into contact with the virus when you leave?

We need an immediate shock so that we can get up quickly.

Closing the borders was a good measure, but not enough. Insufficient because the whole world has to take it. What's the point of closing our country's borders (by air and land) if other countries keep them open? We can stop this outbreak in Portugal, but the day we reopen the borders, the disease will return and we'll be right back where we started. Let's look at China and Macau, which only have imported cases at the moment.

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Assuming everything gets worse by May, I don't expect it to get better by July. It won't be at the worst moment that we'll rise up, that there will be confidence. We need a quiet June and July for COVID-19 to get out of our heads. We need the country not to stop for holidays in August and we need to start recovering. I don't think we'll see any recovery before August or September. September is in six months' time. Will we survive?

I hope I'm wrong, but either we shut down all air traffic and borders worldwide (or at least in Europe) or we'll have an extremely long crisis on our hands.

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FUTURE pt.2

Layoffs will be inevitable. No company will be able to stay afloat for long under these conditions.

The burdens are enormous. Wages, electricity, rent. All this goes on and there's no money coming in. The first to go are the precarious and those on fixed-term contracts. After that, nobody knows.

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Many companies that have closed their doors will no longer open again. The rest will be left with huge debts that put their rehabilitation in serious danger in the short, medium or long term.

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One of the greatest "authorities" in our industry is Mark Coudray. Mark has already been through 11 September and the financial disaster of 2008. He has worked in industry for 50 years and lost his company in the last crisis.

We are in unprecedented times. In my almost 50 years in business, I have seen ups and downs. Lembro-me perfeitamente do 11 de setembro e de 2008. O que estamos a passar neste momento é muito pior e tem um futuro muito incerto.

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The huge difference between this crisis and any other we've experienced in our lives is that this one was sudden. The world stopped overnight.

Typically, in a crisis, people lose money and jobs over time. It's a haemorrhage that is slowly being contained and adapted to.

This crisis is very different. Yesterday there was work, today there isn't. That's why they say we're at war. Because that's exactly what happens in wartime. No active employer has ever experienced this in Portugal. No politician has ever experienced this anywhere in Europe. There's no manual, no correct procedure to hold on to.

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As important as it is - AND IT IS! - preserve human life, it is equally important to think about the future. And the future has many uncertainties, it's very dark and we have to prepare for that too.

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Do I believe that Portugal, the Portuguese and companies will survive COVID-19? Yes, I do. But I believe it will leave its mark not only in our country but throughout Europe for more than a decade.

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