6th June 2020 by Phil Mundy
This document is part of a seminar I delivered to Portsmouth businesses on preparing for the ‘Big Restart’, which looked at the factors affecting businesses facing a changing market and industry. The bottom line points were that companies should treat this as a start-up phase rather than a restart, and develop their processes, refresh their market approach and, critically, manage their cash for survival.
The Office of National Statistics (ONS) publishes bi-weekly reports on the state of UK businesses. I highly recommend digging into the referenced documents, as the ONS are continuously adding new categories of data.
The charts presented here were generated from raw survey data to shed some light on some critical factors affecting businesses:
The data used for this article was extracted from the ONS wave 5 BICS survey carried out between 4th May and 17th May (Ref. ONS2). The survey was sent to >20,000 companies and the resulting data was initially released on the 4th June. Please note the significant, two week period for survey collection and release delay.
If you need clarification on the exact wording of the survey question being asked, the complete questionnaire is posted here (Ref. ONS1).
The chart below summarises the ONS Survey Question: What is the current trading status of your enterprise? The result categories were “ceased trading”, “paused trading” and “currently trading”.
The chart is based on a question response size of n=6,364
Please note the published data was edited by the ONS, including rounding and removal of low significance responses (<1%). As a result, the numbers do not total to 100%, but this does not unduly bias the visual above.
The statistic for companies that have ceased trading (permanently) is problematic because of the low value (<1% aggregate) and the data collection challenges such as no reply because they are closed down, and repeat responses from businesses that closed some time ago but still responding.
Bearing in mind the two-week period these figures relate to, they may be helpful to see why your business trading has been tougher over the last few weeks. There are few surprises here given the government guidance on business types ‘allowed’ to re-open, which is expected skew the distribution.
Of the businesses that responded as being active, 8% of them had restarted during the 2 weeks prior.
If such a large number are trading, how well staffed are they? The survey does explicitly ask how many staff were on furlough in businesses that were trading in the survey period.
The following results show the number of employees declared as furloughed in actively trading businesses and how that may change in the 2 weeks following their survey submission (ie. a potential spread of 4th May-17th May + 2 weeks).
These figures may be an over-optimistic indicator of staff being available for economic activity, as they exclude non-working staff under other special arrangements.
Note that the survey data is based on per company responses that are not weighted by the size of employment. A weighted interpretation of the surveyed companies can be seen in the document “Coronavirus and the economic impacts on the UK: 4 June 2020”.
Of the 82% of respondents declaring they were active:
Over the two weeks following the survey (last 2 weeks of May) those businesses expected this figure to fall to:
Trading companies reported approximately 3% of their workforce are signed-off as sick or self-isolated due to COVID-19.
36% of companies also reported short-term lay-offs and approximately 30% of companies reduced working hours. No magnitude information was available at the time of writing.
For those companies actively trading, how has their turnover been different over the last two week period?
There are an incredible number of businesses trading, but a large proportion with a greater than 20% and greater than 50% reduction in turnover. Without robust cash management and successful customer acquisition, these businesses are at risk of failure over the coming months.
A question comes to mind: How many of the businesses reporting normal and increased turnover are in essential niche areas of their industry or are they businesses that managed to operate safely at high capacity and absorb an excess of demand in the market? Companies coming back to those markets late are probably going to face stiff competition, and initially forced to survive with low turnover and losses while generating sales.
The businesses were asked: “How long will their cash reserves last from the time of completing the survey?”
Unfortunately, there is no breakdown available to differentiate paused and operating businesses, but a previous survey suggested there were 3%-4% more paused companies responding that they had no cash reserves.
These figures seem dangerously low. The time lag between customer acquisition to cash can reach three months in many businesses, and there are still logistics, process, and challenging market conditions to overcome.
The biggest surprise to me is the number of business that still have not got their cash management in order enough to know where they are; this is pretty much the first task I’ve helped clients with to plan their restart and restructuring.
There are some surprises here. Given the ‘historic’ nature of this data, I have talked with many people who are surprised at the high number of businesses declared as operational, and the number of people actively employed vs furloughed. A summary of that sentiment is: “It feels like a lot more businesses just aren’t there”.
I’m not going to try and create definitive conclusions from the limited data so far. The purpose of this article was to generate digestible data without the big headlines or misrepresentation.
The effects of COVID-19 on businesses I’ve been involved with so far are very individual, with core activities that include cash-flow management, recreating marketing channels, overcoming supply-chain issues, and process changes to re-enable services safely.
Whatever the specific difficulties your business and industry face, this is an opportunity to revisit what your company does, and how it gets done. Thinking like a start-up has some merit; search for an approach that generates serviceable customers, establish the successful patterns of work, and above all, survive by managing your cash. ‘Do nothing’ doesn’t look like a good option for most companies.
I will be posting bi-weekly updates as new survey data is released. If you want a heads-up email send me a request using my contact page and I’ll send you an email notification.
emailContactONS1:
Business Impact of Coronavirus (COVID-19) Survey questions: 4 May to 17 May 2020
https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/conditionsanddiseases/articles/businessimpactofcovid19surveyquestions/wave5
ONS1:
BICS Wave 5: 4 May to 17 May 2020
https://www.ons.gov.uk/economy/economicoutputandproductivity/output/datasets/businessimpactofcovid19surveybicsresults
ONS3:
Coronavirus and the economic impacts on the UK: 4 June 2020
https://www.ons.gov.uk/businessindustryandtrade/business/businessservices/bulletins/coronavirusandtheeconomicimpactsontheuk/4june2020#workforce