Editor in Chief (interim) AccountingWEB
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Sage calls for tech-led recovery grant

Business accountancy software giant Sage this week released a “survival, resilience and growth” report that questioned the Chancellor’s post-virus plan for jobs.

16th Jul 2020
Editor in Chief (interim) AccountingWEB
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Sage laments 'missed opportunity' for tech-led Covid-19 recovery
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“The Chancellor made for a strong summer of ‘bricks and burgers’, but the absence of a great digital-led growth agenda was a missed opportunity to accelerate a plan for all seasons,” the company concluded in an email introducing the study.

The report is backed by figures from a survey of 2,000 businesses illustrating how the crisis affected them and how different sectors are feeling their way back to growth and profitability.

Four out of five (82%) UK businesses reported making a profit in March, but the figure plummeted to 44% during April and May as companies wrestled with a sudden drop in demand and fundamental changes to their operations.

Half of the small businesses surveyed expected to make a profit in June and 60% by the end of the year. Looking ahead to this time next year, a quarter of firms did not expect to be back in the black.

Concerns on the horizon

Many businesses still face problems such as adapting to social distancing restrictions (65%), reduced demand (44%), cash flow problems (39%) and supply chain disruption (32%).

The biggest fear was the prospect of a second spike in infections for 50% of companies, who are not confident they could survive a further -20% drop in revenue between now and September. Overall, 15% of firms did not believe they would survive a second spike.

The trauma caused by the Covid-19 outbreak has deepened awareness of business continuity needs. Just over half of the survey respondents said they were prepared for a second wave, but larger numbers now also had plans in hand for cybersecurity breaches (58%), Brexit-related disruption (56%), legal and regulatory changes (53%), cashflow problems and supply chain disruption (both 53%).

Of course, that leaves nearly half of the businesses without specific mitigation plans in place. The levels of preparedness were higher in regulated sectors such as finance, technology and transport, while beauty, hospitality, media and creative sectors were least prepared – a reflection of the sectors that were hardest hit by the virus. The same pattern was reflected in how likely they are likely to revive as the lockdown eases.

Let tech lead the way

As a software developer, Sage is obviously keen to promote digital solutions to help businesses overcome the hurdles in their way. When asked, four-fifths of the respondents said adopting digital technology would be critical for their recovery, but only a third of respondents said they were planning to invest in technology; another 41% were considering it.

When presented with different options to stimulate recruitment around the same proportion (40%) went for a government technology grant, 10% ahead of those who favoured a 2% cut in employer’s national insurance or those who would like to see more investment in training and apprenticeships.

Sage UK’s managing director Sabby Gill was equally keen to get the government to help businesses access to technology and finance. “What businesses really need now is flexibility and stability so they can move ahead and adapt – which is why their preferred option is a grant to spend on technologies, and they believe this will do more to help them increase hiring than support for retraining,” he said.

“The measures announced by the Chancellor in his summer statement are encouraging but we need to go further,” Gill continued. “Sage, on behalf of the country’s SMEs, is calling on the government to act now and take a three-pronged approach to aid digital adoption, help to boost exports and provide tailored support that encourages entrepreneurialism by equipping the unemployed with essential business skills.”

Join Sage executives Chris Downing and Michael Office for a fireside chat with AccountingWEB at 1pm on Wednesday 22 July, when they will discuss the survey findings and how the impacts of Covid-19 are playing out for businesses and accountancy practices.

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