Boards are turning attention to life after lockdown. Businesses that ceased / slowed trading over the recent past are seeking the most efficient and effective paths to reactivation. Those paths will be navigated by reference to the amount and depth of scarring sustained by the business in lockdown and the shape of the new reality for each business as the economy reawakens
We blogged about mothballing businesses at the beginning of lockdown. The reality is the approach on the way out mirrors the approach on the way in – identify the issues, understand the options and engage with pragmatism.
In our global economy restrictions are lifting at different times in different geographies East to West. The same will likely be true closer to home as UK the restrictions are lifted gradually and possibly according to sector, geographic region and even possibly age. All this will affect supply and demand. A business might be able to reactivate but if its employees customers and suppliers remain restricted then it will not be business as usual for quite sometime.
There will sector specific issues
- construction was suffering a general slowdown and extreme cost pressure during 2019. After lockdown its sensible to assume the housing market will be slow to recover
- retail problems are there for all to see and the ongoing shift from high street to esales will be speeded up balanced out for some as loungewear and video con chic surge
- automotive was also in the throes of huge challenge and change as electric vehicles continue to replace diesel and petrol. Now consumer spend will likely be focussed elsewhere until economic confidence improves
- travel industry struggles will continue post lockdown with likely less airlines. How will travel insurers react and will consumers want to visit foreign and busy destinations?
- leisure is under huge pressure with possibly the longest road to recovery. Pubs and restaurants will likely have to continue social distancing for some time yet – possibly until a vaccine is found. With margins paper thin as it is a lack of sales volume will be catastrophic without further Government assistance
Straddling all of that is Brexit – will the UK stick to previously agreed deadlines to leave the EU?
All of the above impact the shape of any business in what will be the new reality. Can you access sufficient supplies assuming there is demand?
Thought will need to be given to any increased liabilities – further loan or other finance during lockdown that needs to be factored in to balance sheets and P&L.
For most businesses turnover will continue to be reduced for the foreseeable future and assuming there are no nasty surprises – a second lockdown.
In that case do you “unfurlough” all or some employees. Perhaps you will have to make redundancies as you refocus the business and concentrate on core and profitable areas. You will likely have to continue social distancing for the foreseeable future. Should you /can you require employees to wear masks? Can you take employees temperatures as they arrive in the office/on site?
There will be other psychological impacts to factor in – employees feeling guilty about others who lost their jobs, the longer term effects of a workforce having worked from home for months will that be the new norm – did it work for your business?
Many consumers and businesses will be cash strapped and nervous about health implications as restrictions ease – crowded bars, crowded transport, crowded cities will all be dual edged swords. Discretionary spending will take longer to improve.
Meanwhile landlords and suppliers will be seeking delayed payments and in turn business will want prompt payments from customers perhaps seeking cash on delivery. It is hard to imagine there will not be significantly more restructuring activity at least as creditors use winding – up petitions or administration to assret their rights and debtors use voluntary arrangements and administration to protect themselves. Clear and effective communication with a large dose of pragmatism will be the best way forward.
It’s unlikely it will be business as usual in the UK until late 2020 early 2021. Pick up may be slower than that. There will be opportunities for strong businesses to reduce competition. There will be offers to buy as weaker businesses need to slim down and refocus on core products and services. There will be plenty of room for consolidation in what will be a different and for a time smaller overall market.
Sensible planning and vision will be key and will differentiate businesses success or failure in life after lockdown.