Economies that imposed an early lockdown will thrive

Countries that imposed strict and early social-distancing measures in response to the COVID-19 outbreak will result in their economies recovering much quicker than those who took a much more relaxed approach. Read more: Economies that imposed an early lockdown will thrive

Economies that imposed an early lockdown will thrive

Countries that imposed strict and early social-distancing measures in response to the COVID-19 outbreak will result in their economies recovering much quicker than those who took a much more relaxed approach.

This is according to new research from ESCP Business School.

According to Professor Nabil Kahalé the social-distancing measures that have been taken to slow the spread of the COVID-19 epidemic in most countries, are already causing huge economic consequences.

However, Professor Kahalé has proven in his recent studies that although social-distancing measures can damage the economy during the containment period, those countries that applied these measures strictly and as early as possible, will only suffer economic losses for a short period of time.

This is because strict social distancing measures require a shorter period of time to reduce the number of infected individuals to a predetermined level. Therefore, countries that have enforced early interventions will diminish their total economic loss in the long-term as their society can begin to operate again having obtained low infection rates.

“When social-distancing measures are needed to contain an epidemic, they should always be applied as strictly and as early as possible, so that they attain their objectives in a short period of time,” says Professor Kahalé

As most of us have been in lockdown for over a month now, we are now starting to look ahead as to how our economy will recover long- term. What is apparent though is that those countries where stringent measures were applied early will also recover much quickly out of this crisis – a lesson for many governments going forward.

Photo: depositphotos.com

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Economies that imposed an early lockdown will thrive

Source : Business Matters More   

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Business owners and shareholders – the risk of paying unlawful dividends during the COVID-19 Pandemic

It goes without saying that the current situation represents a very difficult and unpredictable time for many businesses and for the economy. Read more: Business owners and shareholders – the risk of paying unlawful dividends during the COVID-19 Pandemic

Business owners and shareholders – the risk of paying unlawful dividends during the COVID-19 Pandemic

It goes without saying that the current situation represents a very difficult and unpredictable time for many businesses and for the economy.

Partner David Few, in Blandy & Blandy’s Corporate & Commercial team, explains why business owners and shareholders should consider whether to declare a dividend given the Coronavirus (COVID-19 pandemic and the legal requirements that must be followed if doing so.

From placing staff on furlough leave to taking advantage of the various Government schemes aiming to protect jobs and to conserve cash flow, companies and their owners are faced with making vitally important but hard decisions, with a growing number of businesses closing and trading conditions becoming increasingly challenging.

It is therefore important that before owner managers consider whether or not to declare a dividend they should remember that certain legal requirements must be followed. There are three major conditions.

  • Firstly, the company must have sufficient distributable reserves out of which to pay the dividend.
  • Secondly, the directors must have regard to the cash reserves and working capital requirements of the business.
  • Lastly, the dividend must be declared by reference to the company’s relevant accounts.

It is not possible to decide at a later date that what should have been paid as a salary had been wrongly paid as a dividend. The risk is that if a dividend is wrongly paid, any shareholder who receives a dividend may be liable to repay the sum as it will represent an unlawful return on capital. Further, if the company goes into liquidation, the liquidator will almost certainly consider whether to seek to recover the dividend from the shareholders for the benefit of the unsecured creditors.

Against this background, the issues of dividends requires some thought and a decisions as to whether it is right and proper for companies to be declaring dividend during this time

In many cases with SME businesses, the owners and managers of the company are the same people and there has always been a temptation for directors to pay themselves by way of dividend as opposed to a salary or bonus to benefit from the tax benefits that follow. Such a course has always been required to be followed with care but particularly now in these unprecedented times.

For the present, directors should therefore be careful before declaring dividends and be asking themselves as to whether they should be remunerated through salary and pay income tax and national insurance.

Read more:
Business owners and shareholders – the risk of paying unlawful dividends during the COVID-19 Pandemic

Source : Business Matters More   

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