Image of
Loading...

Problems as we emerge from lock-down

The precautions taken by government to contain the COVID-19 outbreak, commonly known as lock-down, have created varying problem for UK businesses. As we ease our way out of lock-down many of us will have further issues to confront. This post considers some of those issues.

According to the Office for National Statistics, economic activity in the UK fell by 20.4% in April 2020. This is the largest drop in a single month since records began in 1997.

Which group does your trade fit into?

The way in which we respond to efforts to re-open doors to our businesses depends on how our firms continues to be affected by lock-down. There are three broad categories:

  1. You are unable to trade. COVID-19 restriction mean you cannot sell your goods and services. Pubs, restaurants and much of the leisure industries fall into this group. Typically, this has resulted in the furlough of all staff and a complete absence of sales.
  2. You have managed to stay open for business, but at a much reduced level of activity. Perhaps some staff have been furloughed, sales are much reduced, the business has struggled to avoid losses and depletion of cash reserves.
  3. You have experienced no drop in activity. It has been business as usual.

Very few businesses will be fortunate enough to be in the third category but there are some – we visited a Magnet Kitchen Showroom (full social distancing measures in place) on Thursday and the manager was keen to tell us that he’s never been so buy since lockdown. Their new online virtual design service had proved a real hit with customers who were having to spend more time at home and had decided to use that time to plan a new kitchen.

Group 1 – emerging from total lock-down

if you are in this group – the major problem is that lock-down will not disappear overnight.

Restrictions are likely to be eased slowly to avoid a second wave of infection.

Social distancing will reduce a business owners’ ability to trade at pre-March 2020 levels. As this will limit the potential to re-establish sales it may be impossible to reinstate staff and breakeven. Businesses in this group may have to fund losses for some time and even with government support, may find it difficult to stay solvent.

Group 2 – Emerging from a reduced trading position

If your Business is in this group you may have maintained some activity but have possibly struggled to stay profitable. Cash reserves, even with grants received and cheap, government-backed loans, will likely be reducing. For your business, much will depend on a return to demand for your particular goods and services after lock-down.

Group 3 – Business as usual

Businesses that find themselves largely unaffected should count their blessings. However, any continuing downturn in demand, economic activity, will at some point have a large-scale dampening effect on demand as consumers reign in expenditure “just in case”.

What action should we be taking as we come out of lock-down?

Now is not a good time to stick your head in the sand and hope all turns out well in the end. Now is the time for constructive reflection and planning.

It may well be that prior to COVID you were already trading close to the wire with insufficient work or orders to keep your existing workforce fully employed. If that is the case it is probably time to look at whether some redundancies are required to protect the business. It’s never an easy thing to do to tell people that their services are no longer required but now is not the time for a business owner to shy away from taking difficult decisions.

We would urge business readers, whichever group they fit into, to take a hard look at their forecasts and reshape them based on a gradual return to pre-COVID activity levels.

And Brexit, still bubbling along in the background, will need to feature in your considerations.

If you need help organising your thoughts to produce a road map to find your route out of lock-down or management accounts to see where your business is at please get in touch.

Avatar for Jon Pryse-Jones
About Jon Pryse-Jones

Since joining THP in 1978, Jon Pryse-Jones has been hands on with every area of the business. Now specialising in strategy, business planning, and marketing, Jon remains at the forefront of the growth and development at THP.

An ideas man, Jon enjoys getting the most out of all situations, “I act as a catalyst for creative people and encourage them to think outside the box,” he says, “and I’m not afraid of being confrontational. It often leads to a better result for THP and its clients.”

Jon’s appreciation for THP extends to his fellow team members and the board.  “They really know how to run a successful business,” he says.  He’s keen on IT and systems development as critical to success, and he continues to guide THP to be at the cutting edge and effective.

Join The Conversation
ICAEW
Cyber Essentials Plus certification
Sign up for our Newsletter