How European businesses can position themselves for recovery

For tens of millions of Europeans, the coronavirus pandemic will be a life-changing event. Even if they are untouched by the disease itself, the upheaval caused by the virus will have a profound effect on many people’s livelihoods and life circumstances. Never before, except in wartime, have whole industries shut down and consumer demand dropped so far so fast.

 
The economic implications are highly uncertain. In a midpoint scenario explored in previous McKinsey research, the world economy would experience a sharp downturn followed by a relatively slow recovery, as physical-distancing measures are kept in place for several months. In this scenario, the economy of Europe (defined as the EU 27 and the United Kingdom) would shrink 11 percent in 2020, and it would take until 2023 before economic activity would return to precrisis levels.

For European business, the priority is to keep their employees and customers safe, even as their companies face serious and unprecedented cash-flow, supply, and operational issues. It is also important, however, to look beyond the immediate crisis and begin to imagine paths to the next normal.

In this article, we present a number of indicators that could help European businesses anticipate the shape of recovery and help them in reformulating their strategic posture. Among them: patterns from previous recessions (part 1), changes in customer behavior due to COVID-19 (part 2), and the effect of lockdowns on different sectors (part 3). Combined, these indicate how businesses can start to strategize about the postcrisis world (part 4)—based on how fast they are likely to recover and how much they have been changed by the crisis. Some will have to “lean in” to changes that are in the works; others will have to restructure, and some will have to swerve, reinventing themselves even as they seek to find their footing. Our conclusion is simple: those companies that focus on planning ahead across multiple time horizons are likely to emerge faster from this crisis than others, and in a more resilient state.

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