Force majeure clauses are under scrutiny as supply chains buckle in Asia amid the Coronavirus outbreak. But the government policy response means asset resilience is also being considered more widely in global sectors from airports to university accomodation. Colin Leopold and Kate Burgess report
It used to be said: ‘when America sneezes, the world catches a cold’. With China bed-stricken and feverish, the world economy is reaching for a face mask. The respiratory illness known as Coronavirus or COVID-19 has so far claimed over 3,000 victims at the time of writing, with China by far the worst hit. In the past week, it has spread to Europe and the UK moving north from Italy and Tenerife.
It is impossible to predict how the virus will evolve over the coming weeks and what the long-term economic impact will be, in Asia and globally, but red lights are already flashing in sections of the global economy. For infrastructure investment, it is now not the virus itself that poses the greatest risk but the policy response of governments and the more subtle shifts in trade and business that could emerge as a result.
“We are seeing some draconian measures being put in place by corporates,” says a source at one of the world’s largest infrastructure funds.
The UK government acknowledged over the weekend that it might have to follow China’s example by closing down cities and banning large events. Already, across Europe, investor meetings are being cancelled or postponed due to travel restrictions or employee concerns, and M&A processes have been put on hold. In Asia, factories have been closed for over a month and, at the time of writing, are struggling to come back online, stretching global supply chains to breaking point and halting the import of energy products. Construction has been disrupted on infrastructure projects elsewhere. In Australia, airport revenues are being hit. Restrictions on trade and the flow of people threaten growth in the US.