The ongoing and unprecedented disruption caused by the coronavirus pandemic has left businesses scrambling to rewrite business plans, as a direct result of the rapidly changing economic landscape.
Much of the average businessman’s focus at the moment is glued to the immediate response to the acute financial pressures and resource shortages resulting from the lockdown. There is a growing sense that longer-term planning, the kind that will ultimately decide the fate of a business, is being neglected.
So, to paraphrase Private Frazer from Dads’ Army, ‘are we all doomed!’
Are trading patterns likely to resume as normal?
The answer is probably no; there is very little likelihood that trading post-COVID-19 will ever resume as normal. Many experts believe that a trend is now emerging, with businesses merely treading water through the crisis. To make it worse, they have little or no idea how to shape themselves to deal with the challenges that lie ahead, and many may go to the wall when support schemes close.
At the moment, lockdown is easing slightly and will eventually be lifted completely, wage subsidies are coming to an end, but operating costs will soon need to be paid. It is this time immediately following the easing of lockdown restrictions which poses the real threat to businesses, testing not only their resilience but also their viability in a post-coronavirus world. Especially a world in which trading norms are a thing of the past.
What’s happening at the moment?
High-street retailers started to re-open their doors on 15th June as long as they comply with coronavirus safeguarding guidance. However, there is no guarantee trade will resume exactly how it did beforehand and with hundreds of new COVID-19 cases still being confirmed daily; extensive testing and contact tracing will need to be significantly improved if a major second wave of infection is to be avoided.
Just because the country is ready to re-open for business does not mean consumers will be ready to return to their old ways. Indeed, a recent Ipsos MORI poll found the majority of Brits feel uncomfortable about going to bars, restaurants, small shops and anywhere where there is likely to be large numbers of people, such as out-of-town shopping centres and are likely to avoid them. This discomfort is putting businesses on notice that sales are unlikely to rebound immediately.
There is clear unease at other consequences of the lockdown ending,” said Keiran Pedley, Research Director at Ipsos MORI. “These numbers suggest that it will take some time for some parts of the British economy to return to any semblance of normality, even after lockdown has ended.”
There will be tough choices to be made.
If a business cannot restart once the payroll and furlough grants are gone, stark choices will have to be made about pivoting or even exiting markets entirely. The prospect of both debt collectors and HMRC officials chasing for outstanding payments is uncomfortably real.
It is obvious that no business sector is immune from trading interruption at present, but there are some companies which have more reasons to be anxious. Some industries will be more vulnerable than others and will experience a much more protracted return to normal. At the same time, it is almost inevitable that some businesses will simply not re-open at all. Particularly those already experiencing financial or operational difficulties before the coronavirus pandemic.
The business sectors that rely on consumer spending such as hospitality, travel, aviation and high street retailers are the most at-risk given the need to comply with social distancing regulations. These sectors have seen a dramatic fall in customer demand, supply chain disruptions, been forced to defer launches of new products and services, and pretty much all capital investment plans has been put on hold.
Stick, twist, or exit?
All businesses, large and small, need to respond quickly and effectively to ensure short-term survival and to build resilience to chart a path to longer-term recovery.
So, as SME’s (small to medium-sized businesses) are embroiled in crisis planning to stave off immediate collapse, there are other options to consider. These include a review of cash flow forecasts, as well as their business model. SME’s need to gauge whether they can pivot to continue delivering services differently, either through online sales, takeaway, home delivery, or whether some activities can be cut, such as marketing.
Most countries, including the UK, are expecting a second but hopefully much smaller peak this winter, coinciding with the annual cold and flu outbreaks. A second wave will inevitably lead to a second but hopefully, smaller contraction in business. If any firm is not already thinking about how they will react, they’re going to lose big time.
Firms must start accruing financial reserves immediately, in preparation for a second peak in COVID-19 cases following the lifting of the restrictions. Exiting the market early may be an option to avoid further pain down the line, because if a business just limps along accumulating debts it has no realistic chance of paying off, it is ultimately doomed.
The initial bubble of positivity brought about by Rishi Sunak in the shape of loans and grants for many businesses is now starting to deflate. Although widely welcomed and extensively embraced, these schemes will for many firms, merely equate to short-term sticking plasters on irrecoverable wounds.
Twelve weeks on from lockdown, many businesses are now at a crossroads without an obvious route forward. Their doors are closed, the overheads are accruing, and even if trade is allowed to continue, research has shown that consumer confidence has been severely shaken.
Restructuring and finance options should always be explored where possible. Still, if it is clear that your business is realistically no longer viable with liabilities escalating and with little or no chance of paying what’s due, business owners will need to make some very uncomfortable decisions.
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