Our view on the UK economy
"As Coronavirus quarantine in the UK continues, we outline what we think the mid-term impact will be, as well as the trading conditions after the restrictions have eased." The biggest threat to global economic stability is what is happening in the US. Bank of America recently released their analysis giving a likely scenario of 10% GDP contraction over 3 quarters with 47 million unemployed workers. At present they do not have anything like the Coronavirus Job Retention Scheme. The UK Office for Budget responsibility predicted a 35% contraction and 2 million unemployed. Considering the US picture this is very good and by having an economy in comparatively better shape with a high percentage of companies surviving means that the UK has an opportunity to gain a little bit of market share at home and abroad. Whether you are competing with an American PR firm or an international competitor in the same foreign market, the government has set up these schemes to make sure you can take advantage of the downturn.
Some of you may have read economics at university but a very simple concept is that there is a perfect, inverse relationship between the unemployment rate and growth. As the economy grows, unemployment goes down, as the economy contracts, unemployment goes up. A 35% contraction is a much bigger drop proportionally than the rising unemployment rate. This means that the Government’s policy decision has been about making sure they keep as many people as possible in employment by keeping as many businesses afloat as possible.
For the UK government these are the numbers that count, because this means more businesses will have some cash (via grants) to take advantage of new opportunities and employees, furloughed or not, will still be able to go out in the summer and spend some money (albeit a bit less).
If you work in retail, take advantage when the lockdown is lifted. People will want to meet up for a coffee, food or a drink to socialise again. We all might have awful hair that needs a proper seeing to by a local hairdresser and some of us will want to hit the gym and maybe get our beach bods ready for what is left of the summer.
Assess your own market, your competitors and look at new markets if that is relevant and achievable.
Here’s how some of our clients have been approaching the lockdown...
Michael Harley: Redplug
UK’s leading Rockwool Approved Blown Insulation Installer
In the current Covid 19 crisis we have tried to take a calm, practical approach. We have looked at guidance from the government information for the construction industry. As a small business we have adjusted our operation accordingly with the government advice to be able to keep our employees safe and keep the business running.
Our customers have been understanding throughout this and hopefully we can continue once the restrictions have been lifted.
John Higginson: Higginson Strategy
Award-winning communications agency
We are a purpose-led consultancy based in London and Manchester. We support a range of companies, charities and public bodies, helping them to explain their purpose, getting them media coverage and opinion pieces in national publications. We also have a podcast that looks beyond the headline called Behind the Story.
Prior to Covid-19 we had two offices so we were already good at working remotely. Once the virus hit we immediately started working from home – luckily we don’t make physical products so this was achievable with minimal disruption.
As a result, the operational challenge we have faced has been not so much on the technical side, but more on keeping people motivated whilst they’re apart. Like many we very quickly became video conferencing masters and have conducted much of our business through this medium.
The other key affect on business is the fear of a recession. Being a consultancy is it (fortunately) easier for people to put our contracts on hold than get rid of us completely. The fact that our clients have been able to furlough non-income-generating staff has also worked in our favour as in some cases it has freed cash for them to continue to engage us. As an outside agency we’re also very productive (we have to be to prove our value compared to in-house resources) which is a useful thing for our clients at the moment.
So after an initial drop-off in clients, we now appear to be winning business. Among those signing up have been a number who are wanting to support the NHS or government in some way, such as through the provision of ventilators or Personal Protective Equipment (PPE). Higginson Strategy has benefitted here due to our access to these channels and our specialism in communicating the right messages about people doing good. Providing they are presented authentically – and not just for commercial gain – these kinds of messages help the bottom line for our clients as people in general want to do business with organisations they believe are doing good.
Overall we have been fortunate that our business model has proven resilient to the pandemic so far and, while we are obviously looking forward to returning to normality along with everyone else, we are pleased to have maximised the opportunities identified along the way. Ross Chaplain: Lykke and Hygge
Specialist Hair Professionals in Evesham
“Covid-19 was tough for us to begin with. With closing completely, we have had to be really careful to minimise our costs. Having recently taken on a new member of staff this was especially challenging, and, whist we were able to furlough most people, our new-starter was not eligible so we have had to find an alternative way of protecting what income we can for her by paying her a training wage."
We have since received a small business grant, which has eased our cashflow, and we’re waiting for the outcome of our CBILS (Coronavirus Business Interruption Loan Scheme) application which should help us through the next month or so.
When business gets going again we’re confident the demand will be there. We’re preparing to work differently, with PPE and potentially taking on some new assistants to help maintain distancing between each stylist team.
Our staff are really keen to get going again and we’ll be offering them extra working hours where needed to help meet the new demand. All are welcome down for their first post-lockdown haircut!”