Post-lockdown plan: Dangers remain in road ahead
Accounting leaders and experts saw glimmers of hope after the government announced plans to have society fully reopen by 21 June. But some tricky hurdles remain on road out of lockdown.
A wave of relief washed over most businesses this week as Prime Minister Boris Johnson gave firms struggling through the pandemic a post-lockdown roadmap to plan around.
The prime minister said he hopes to fully reopen the country and remove all limits on social contact within months, on the proviso the vaccine rollout lives up to expectations.
Britain’s successful vaccination programme “shifted the odds in our favour”, allowing for a gradual reopening of society, Johnson told a televised Downing Street press conference on Monday.
“Most businesses will heave a sigh of relief at being able to put some sort of plan in place with a date to work towards,” said Alastair Barlow, founder of flinder.
“However, there will still be businesses that fail between now and the country reopening and even after that, but nonetheless businesses can actually start to plan properly.”
Most leaders want certainty, he told AccountingWEB. While the plan gives clarity and a clear direction as to what happens next, there is still “a huge caveat that the data needs to support each of the dates”.
It’s all about planning, particularly cashflow and scenario planning
“It’s all about planning, particularly cashflow and scenario planning – what does this mean for businesses, what will these various opening dates mean for their sector and their business?” Barlow said. “And what will customer behaviour be like when the government does open the gates?”
Finance directors will put cashflow modelling and scenario planning at the top of their agendas, he said. “Employees will be back from furlough, customers will theoretically be back to buying, but to what extent and how will these match up?” he added.
Businesses would undoubtedly focus on customers, but they must not neglect their own employees. “There is a responsibility to employees but also a business continuity risk of bringing too many people together that needs to be considered,” Barlow said.
The four-stage plan
There will be five weeks between each restriction being lifted, with four weeks set aside to assess new data, and one week’s notice given to industries to prepare for a reopening.
There will be no return to a regional system of tiered restrictions, the PM announced, with all of England moving away from lockdown at the same pace.
“The end really is in sight,” Johnson said, as he signalled the first lifting of restrictions: the reopening of schools on 8 March.
Rocky road ahead
Some industry lobbies expressed frustration over the extended timetable for reopening, but many company bosses said they recognised how caution could boost consumer confidence in the longer term, and prevent a fourth wave of the pandemic and return to lockdown.
However, the need for support remains urgent for industry sectors fighting to make it through the summer.
The British Beer and Pub Association said the “cautious” reopening approach would cost pubs £1.5bn and that just 17% of the industry’s capacity would be able to open from April.
Kate Nicholls, chief executive of UKHospitality, said the sector was “devastated” that full reopening was months away. Although outdoor trade is planned for April, only 40% of hospitality firms have outside space, she said. Many pubs will have to stay shut until customers are allowed indoors, from May at the earliest.
“On one side of the coin we have continued restrictions. On the other, we need corresponding business support,” added Mike Cherry, the national chairman of the Federation of Small Businesses.
Julie Palmer, regional managing partner at business recovery specialist Begbies Traynor, warned that the road out of lockdown “may be a more perilous time than lockdown itself”.
“Support measures will be sector targeted and inevitably business will need to stand on their own two feet, but at least with the promised certainty it won’t be stop-start,” she said. “As ever those businesses that are adaptable will be best placed to prosper from the enthusiasm of people to live a normal life again.”
All eyes on Sunak
“Whilst it is good for us to have a date, we are very disappointed that non-essential shops will miss the Easter period, especially as they also missed out on most of the busy festive period,” said Andrew Goodacre, the chief executive of Bira, which represents thousands of independent retailers.
“We therefore want the Chancellor to recognise this in the Budget next week and make clear statements about the support that will be available for the next 12 months.”
Robust support measures and not just “sticking plasters” are needed to help UK SMEs and entrepreneurs recover and grow well beyond the pandemic, said Greg Taylor, head of financial solutions at MHA Macintyre Hudson.
“Covid-19 lockdowns have crippled SMEs and just extending the Coronavirus Business Interruption Loan Scheme (CBILS) is not going to cut the mustard, as the scheme is no longer fit for purpose to support them at this stage of the pandemic,” Taylor said.
“Instead, the Chancellor should replace it with a permanent, state-backed, small business loan scheme.”
The government should guarantee 80% of loans to small businesses, Taylor said, ranging from a few thousand pounds, up to £10m per company over a six-year lending period.
The Chancellor should go further to help SMEs and protect jobs as the road to recovery is still a long way off
Like the original Enterprise Finance Guarantee (EFG) scheme on which CBILS is based, the new scheme must include revolving facilities such as overdrafts, asset finance facilities, invoice finance and term lending “to ensure businesses have the working capital they need to grow”.
“Although it’s encouraging to see that both the furlough scheme and business rate relief will be extended, the Chancellor should go further to help SMEs and protect jobs as the road to recovery is still a long way off,” Taylor said.
The first lockdown cost UK hospitality and high street businesses £45bn in turnover, researchers from the universities of Cambridge and Newcastle estimated.
Non-food high street shops, those selling everything from books to clothes, saw sales evaporate during the first lockdown when they had to shut, costing around £20bn in turnover. Sales returned to normal once the national lockdown lifted.
The shortfall for bars, pubs and restaurants was “dramatic”, with the first UK lockdown causing sales to fall as much as 90% below the business-as-usual level, equating to around a £25bn revenue loss, the researchers said.