Cold comfort over bird flu

If you’re the finance director of Bernard Matthews Foods, it’s bad news. If
you’re the finance director of John West Foods (a Heinz subsidiary), it’s good
news. The subject, of course, is the H5N1 strain of bird flu, now officially in
the UK since a dead swan was discovered in Fife, Scotland.

Avian flu struck earlier in Italy and France. If their experience is anything
to go by, people will be eating less poultry and more fish in the weeks ahead.
But what’s the outlook if you’re the finance director of a company which doesn’t
sell either?

There are so many imponderables involved that few economists are actually
willing to come up with any firm predictions.

Obvious effects

In a 30-page briefing paper, the International Monetary Fund is unable to do
much more than state the obvious: “If the pandemic is severe, the economic
impact is likely to be significant, though predictions are subject to a high
degree of uncertainty.

“Once the pandemic has run its course, economic activity should recover
relatively quickly.”
One problem finance directors should plan for in a pandemic is staff taking time
off – either because they’re sick, caring for loved ones, or too scared to
travel. A Cabinet Office contingency planning paper suggests firms should
prepare for a “base scenario” in which around 25% of their staff fall ill in one
or more waves of a pandemic, each of around 15 weeks duration.

Some companies are planning for worse. Clearing bank HSBC is reported to be
allowing for as many as half of its staff to be absent at some point during a
pandemic.

Fear factor
Yet staff absence is unlikely to do much to dent overall output – most companies
find ways to make up the slack – but a pandemic “fear factor” could put a
temporary brake on consumer spending.
Sean Rickard, a senior lecturer in economics at Cranfield University, who has
studied the impact of agricultural crises on the economy, dismisses the idea
that a pandemic would have any lasting effect.
“I can’t see the link between bird flu and a sustained reduction in expenditure
in the economy. You would need to see people cutting back their expenditure to
such a degree that companies started laying people off,” he says.

Rickard’s view is supported by some of the scanty evidence available. In
2003, the East Asian economy lost only half a per cent of GDP, mostly in the
second quarter, as a result of the SARS outbreak, which caused widespread fear
of a pandemic.

And Vietnam, the country worst affected by avian flu – where 17% of the
poultry flock has been slaughtered at a cost of $120m (£68.5m), around 0.3% of
GDP – continues to display healthy growth. Fears that the country’s tourist
industry would be decimated have proved unfounded with visitor numbers growing
by more than 20% last year.

Business contingency specialists urge firms to have prudent plans in place.
But Rickard counsels: “I would have thought it would be a mistake for almost any
business to think that the biggest risk they face is a pandemic.”

Health and Safety Executive advice

• Send home any employees who have flu signs/symptoms

• If you have employees who can work from home then this should be encouraged

• Opt for video-conferencing or tele-conferencing where possible instead of
holding meetings

• Carry out appropriate training so remaining workers can carry out
unfamiliar tasks

• Review risk assessments and apply the necessary control measures to take
account of the reduced workforce

• Young workers and pregnant workers must be borne in mind in any temporary
reorganisation

• Think about extra precautions if workers, who normally work in a group, are
required to work alone or in a remote location

• Although there may be some advantages in switching off an air conditioning
system, it may result in discomfort and ill health effects