Keeping Your Head Above the Water and Horizon Scanning

This update is focused on the conversations that are starting to be had about life after the lockdown, however that may look.

The starting point is for your business to create and keep under review its contingency planning. To do this, it is important to have a sense of how the economic environment is changing in the new and strange place we all find ourselves in.

Data – understanding what is going on

To support individuals and businesses moving forward and to assist them in producing contingency plans, the Office for National Statistics (OFNS), one of UK’s largest independent producer of official statistics, has been working to produce experimental statistics to try and provide indicators of the impact of the coronavirus in a timely way. These come as online weekly bulletins, which contain data and l indicators about:

  1. the condition of UK society;
  2. the economy and
  3. the impact of the coronavirus pandemic.

This data has been based on information collected and analysed from rapid response surveys sent to businesses across the UK, novel data sources and experimental methods.

The main sectors from those surveyed who have seen turnover lower than normal and attributed this as a result of coronavirus were:-

  • manufacturing;
  • wholesale and retail trade;
  • accommodation and food services and
  • administrative and support services.

However, not all sectors appear to have been so negatively impacted by the coronavirus. Sectors that reported unaffected turnover in this period were:-

  • professional, scientific and technical activities and
  • information and communication services.

The main headlines from the most recent data point taken from the report are:

  • Of the 6,171 businesses responding to the Business Impact of Coronavirus (COVID-19) Survey (BICS), 24% reported they had temporarily closed or paused trading for the period 23 March to 5 April 2020, 0.3% reported permanently ceasing trading, while 75% were continuing to trade.
  • Of all those businesses responding within the arts, entertainment and recreation sector, 82% reported a temporary pause to trading.
  • Two-thirds (66%) of all businesses that were continuing to trade indicated their financial performance was outside of their “normal” range, with 93% of these saying their turnover was lower than “normal”.
  • Of those businesses whose turnover was outside of their “normal” range, the accommodation and food services activities sector had the highest proportion of businesses that responded their turnover was substantially lower than “normal”, at 87%.
  • Of those businesses that continued to trade or had paused trading, 94% indicated that they have an interest in at least one of the government schemes on offer to them; the scheme that was declared of interest most often was the Coronavirus Job Retention Scheme (CJRS), having been selected by 80% of responding businesses.
  • Of all responding businesses continuing to trade, 60% were confident that they had sufficient financial resources available; only 6% did not feel confident they had these resources available.

These findings make it clear that the coronavirus has already impacted certain sectors, however to what extent and how widespread this impact will be, remains uncertain. It was reported that although 60% of businesses stated that they were confident that they would be able to continue operating throughout the coronavirus pandemic, 6% said they were not confident and 34% said they did not know. This is however an improving trend from previous data points.

The ONFS indicators may help to give some kind of outlook as to what will happen in certain sectors for the foreseeable future and what life may be like after the lockdown has been lifted.

The next bulletin for ONFS is set to be released on 7 May – we’ll be looking at these bulletins in future updates.

Further Fiscal Support – Bounce back?

Sitting alongside the established government schemes (CCFF, CLBILS and CBIL) is now the Coronavirus Bounce Back Loan Scheme (CBBLS), which is aimed at the very smallest businesses that have otherwise been unable to access credit.

The scheme, called the will provide ‘micro’ loans to small, entrepreneurial, businesses that the government consider to be “the most exposed businesses to the impact of the coronavirus” but that will be crucially important during the UK’s economic recovery. The CBBLS will allow a business to borrow amounts equal to the greater of 25% of its turnover and £50,000.

Interest on the loan is then paid by the government for the first 12 months. Importantly, unlike any other available scheme, lending under CBBLS will be 100% guaranteed by the government.

Also (and perhaps recognising the teething problems encountered by the schemes that pre-date it), CBBLS will not be subject to any eligibility criteria or pre-conditions relating to continuing viability and we have been told it should be available via “a simple, quick, standard form”.

CBBLS launched at 9am on Monday, 4 May 2020. Cash should then be paid to applicants within 24 hours. This is the only fully-guaranteed government lending, for those business least able to access credit, which is a positive.

However, as we are all aware, previous schemes have all had bumps in the road in terms of getting money out to those that need it and this may be no exception to that rule. It also needs to be remembered that CBBLS is yet another loan scheme – it provides cash now but via those business taking on additional debt which will, in time, need to be repaid (or restructured). We’d never advise clients on the taking on of any debt without first appreciating the longer-term considerations.

Finally – Business as usual?

We keep hearing the phrase “business as usual” used as well as the “new normal”.

But what does that really mean for our businesses, who are seeing their businesses change like they have never done before? It looks like although our client’s behaviour has been changing for some time during this time of digital transformation, the strength of our businesses brands and our ability to communicate with both our workforce and customers/clients are being looked at like never before.

As part of this, changes to our supply chains and decisions by brands to diversify mean the big conversation for our commercial clients is how they travel back into the post-lockdown world and what needs to change when they arrive there. What will be paramount is to respond effectively to both the risks and opportunities businesses of all shapes and sizes are faced with to ensure keeping their values and approach as part of a long-term strategy.

Please get in touch either via me or direct to our commercial team on any of the details above.

Stay safe and well.