The Effects of Covid-19 on UK Business

The Effects of Covid-19 on UK Business

Summary of the main findings to date

UKPLC have been conducting telephone and online research to gain information on the effects of the coronavirus on UK business and, although we cannot claim to have a statistically reliable dataset, the situation seems to be fairly drastic and, potentially, disastrous for the economy as we know it.

Firstly, possibly unsurprisingly, there are considerable variations in both situation and behaviour across UK business. Nevertheless the major divide is between those companies engaged in activities necessary to maintain the fight against the virus and all other types of business. Whereas the former are encouraged to continue to trade (and, indeed, may actually benefit financially from the situation), the legislation requiring strict social distancing has had a dramatic effect on most of the work force and almost all other non-essential businesses.  The result is that by far the largest numbers of companies now fall into two main categories: they are either

  1. closed down until further notice, or
  2. no longer operating from their usual premises but with staff primarily working from home

Many of the former have already furloughed most of their staff but they still have other overheads to pay. In addition to the many businesses that were directly affected by the social distancing requirements (including the whole of the hospitality sector, from restaurants and hotels through to all sporting events), many of those engaged in business or in charitable services have also had to close, as illustrated by the following answers to our question Firstly can you briefly explain how your business is dealing with the Coronavirus, or Covid-19 situation?”

We have had to close down, as all our exhibitions and events have been cancelled or delayed. All our staff are furloughed until we are able to go back to work and events start again.

We are an advertising business – not in business at the moment.

“No customers. We are business to business so if the businesses are shut there is no business.”

“Much of my work has been paused. It involves face to face work with communities and is publicly or third sector funded. Little can proceed without face to face contact.”

Even some manufacturing businesses have had to close as a direct effect of the virus either through lack of staff, lack of customers or lack of appropriate premises:

“We put all the staff on furlough on Friday. My business supplies internet based businesses; we still have orders but can’t complete them because of lack of staff on the production end”

On the other hand many of those that continue to operate with staff working from home face logistical difficulties and a lower demand for their services:

We provide water cooler services so some customers still require our services. They are dependent on us to continue working. The other problem is a delivery service but it’s hard as usually there are 5 drivers but we are now down to 1.”

“We have more or less shut down our offices just me and a few key workers here, all (others) have been sent home and those that can are working at home.”

Indeed it cannot be an exaggeration to claim that there are almost no businesses in the UK that are actually operating ‘as normal’.  By far the majority of those continuing to work are engaged in the supply of vital goods and services such as the manufacture and distribution of food, or in the creation (and distribution) of chemicals and screening products as required by the NHS. Meanwhile, other important services have been seriously affected; for example many bank branches have closed or reduced their hours and other financial services have also been disrupted, despite their importance to our economy. Also, of course, our normally vitally important educational institutions have been closed until further notice with all the social disruption that entails. With regard to manufacturing as a whole, there is little or no demand for products other than those mentioned above as being necessary to help resolve the present crisis. Possibly the single exception is home entertainment products – particularly jigsaw puzzles!

Examples of the efforts being made by some companies to maintain activity are:

We are a payroll bureau providing payroll services to 1000 clients across the UK. Since the virus broke we have had to radically change our working practices. We were due to move offices and we now have some staff working remotely from home and the remaining staff split between the 2 offices to enable proper social distancing. We have been identified as an essential business. We have had also had to get to grips with the furloughing legislation etc.

Most staff are remote working, we work in the lab, but only one person at a time. We are still doing the testing but at a slower pace, as I said one person at a time. We are staggering work time. We have all the protective equipment we need.”

“We have isolated everyone that can be. So manufacturing is continuing but we are making sure people are keeping the right distance amongst themselves. Staggering breaks, so no more than two people are in the break area. The offices are practically closed, only 6 people here out of 25.Thats a minimum to maintain management, and we are staggering working hours on that as well. We have the right precautions around the company, eg hand sanitizers. We are shutting down this Friday for two weeks, full paid holiday for everyone. We will reopen on the 20th April. We are partly closing because our suppliers are doing the same.”

“Taking the government’s advice and taking each day as it comes. A lot of our customers are closing, so our demand has gone down, but other customers’ requirements have gone up. We have a very fluid situation, not always knowing how to handle it.”

“We are a manufacturing company and we are trying hard to run as closely to normal as possible, the next few weeks will tell.”

The manner in which business is dependent upon other business either as clients, suppliers or both, together with their concern for what may be around the corner underlies many respondents’ replies to the question “What are the main problems you face at the moment?

“Materials harder to get businesses closing and suppliers closing.”

 “Our existing order book is going backwards nothing has been cancelled just delayed. Our supplier is closing up.”

 “The world has shut down the confusion created by the government announcement, having an impact on staff, uncertainty has risen in staff. People in factories are uncertain they should be at work which is having an effect on our productivity, so we can’t generate as much money. If we cannot deliver complete machinery we can’t make money.”

“Uncertainty of future staffing levels, that staff may need to isolate. Concerns about cash flow and also concerns about personal protective equipment.”

“Businesses who owe you money before corona virus lots of companies stopped paying us as advertisers, as they don’t need advertising for the next 6 months.”

We will return to the concerns expressed in respect of payments and of cash flow further below. In the meantime the concern about confusion as to who should or should not be going to work was not widely shared by respondents. On the contrary they generally expressed confidence in the decisions taken by the government.  In particular those with employees approved of the actions proposed by the chancellor to ease the situation they faced, as evidenced by their responses to the question “What do you think of the chancellor’s plans to assist business through this situation?”:

“I wasn’t expecting for the government to do as much as they have. It is very welcome, regarding income for staff; it releases the burden on us.”

“I think it’s generally well thought out, and will succeed in its aims.”

“It’s very helpful, the furlough system has helped us.”

However, sole traders and other self-employed felt differently:

“Extensive, but with glaring gaps for self-employed directors.”

“It doesn’t help me. As a single Director business I have no employees only myself. I can’t furlough myself because I have to keep the business ticking over with the little work I have – my work won’t automatically return to normal (like a hairdresser for example) so I can’t risk ‘closing down’ completely.”

It should be noted that the majority of our respondents were in businesses that are continuing to trade. Many of those businesses that have closed could possibly take a different view.

Nevertheless, many of our respondents had expressed concerns about the future financial position of either their own business or those they trade with:

“I think when we reflect on what the Government has done it will be complimented as a huge intervention. The problem is the assistance is taking too long to get through for businesses that are struggling.”

“I believe they are doing their best; just need to see the finance come through and that there is not too much red tape that stops companies being able to get to the funds.”

A few others had more direct concern for their own financial position:

I just hope it happens quickly on what they have promised, because cash flow wise I don’t have a bottomless pit, and hopefully get the money from the government.”

Nevertheless only a very few of the respondents claimed to have any present requirement to borrow money with even fewer having applied as yet, so it is too early to comment on the reaction received.

Possibly this will prove to be the most important single issue to monitor over the weeks to come. How many people need to apply and what happens to their application? The stories of high interest charges and various other aspects are worrying but it is early days.

Nevertheless banks will have to contend with the popular view that they should repay the people for the bailout they received in 2008. As one respondent said:

Need to make sure banks support business as due to the virus and government direction many have had to close or have had their business taken away, through no fault of their own and I would hate good businesses to fail due to lack of support or red tape.”

 Finally, some of the other responses to the question asking what problems they presently face provide the sense of insecurity that most businesses now have, even those continuing to trade:

“Uncertainty – what’s happening the whole quarantine period, how long will this go on for?”

“Clarity of the future, we’re a manufacturing company, we don’t know what action to take. We’re trying to make decisions blind.”

“Security of raw materials supply; costs of continuing overheads (rates) – and are our customers going to pay us for the services?”

This latter point is likely to be of increasing concern as the pandemic continues.


Technical Note:

This report is based upon the early results obtained from telephone research conducted by RONIN International on behalf of UKPLC during the week commencing 28th March 2020. The information was also supplemented by responses to an online survey, conducted by UKPLC, at the same time.  The majority of respondents were manufacturing companies based in the West Midlands and remain operational at this time.

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