Professor Arif Khurshed, Professor of Finance at the Alliance Manchester Business School, explores the impact of the coronavirus pandemic on finance professionals. 

It is for this latter reason that the role of finance professionals has taken on such importance of late. Even as the worst social and economic impacts of the pandemic seem to abate, this remains a time of unprecedented uncertainty – as such, the survival of an organisation may well hinge on how successfully its resources are protected and distributed.

The latest ONS figures paint a striking picture of the economic turmoil many have faced – in Q1 2021, 111,145 business closures were recorded, a 30% increase on the 85,115 logged in Q1 2019. It must be noted that shrewd financial management may, in many cases, still not have been enough to save an organisation – though it will have been critical in the survival of many. What’s more, as the economy begins to reopen and most sectors have resumed more normal levels of trading, the skill and nous of finance professionals will be critical for the success and speed of their business’ recovery.

The challenges posed to finance professionals

The broader difficulties invoked by the pandemic are clear to see. A study conducted recently by Nerdwallet among more than 900 UK business managers found that a majority (54%) had felt the last year to be the most stressful of their professional careers to date.

Finance professionals have been required to keep abreast of an unsteady business and consumer landscape, with incrementally lower levels of confidence in long-term planning. For instance, businesses in different regions were affected by separate lockdowns on top of the broader national restrictions, new financial support schemes were implemented quickly and then variously adapted as the circumstances evolved, and of course the bigger picture of the national economy and pressures influencing downturns – each of these elements needed to be constantly monitored and understood. The pressure on financial decision-makers has, therefore, been intense.

Just as quickly as the pandemic set in, business and consumer behaviours were radically altered. With non-essential retail closed for large swathes of the past year, and social distancing measures limiting contact within businesses, demand became focussed in certain areas. Notably, there was a boom in eCommerce spending as businesses rushed to meet consumer demand where possible. In response, financial management teams were required to assess the ongoing viability of their business’ product or service, and to ascertain where credible alternatives could be beneficial to operations – all while evaluating their customers’ continuing capacity to make payments.

Supply chain disruptions have caused further headaches since the start of 2020. The aforementioned eCommerce boom flooded the UK’s domestic shipping capacity with products usually purchased in person or on the high street. Meanwhile, international freight faced a more visible crunch, with delays becoming commonplace and costs constantly fluctuating (Brexit only complicated matters). In this case, finance professionals needed to understand the broader consequences of every development, and to some extent predict a course of action to protect the financial health of their business from any further disruption.

While significant, these issues are just a snapshot of the mounting tasks facing financial management teams through the pandemic. The costs and benefits of remote working, balancing the furlough scheme against critical productivity, tightening access to finance, redundancy measures, and disruptions to supply chains and investment flows have, among numerous other factors, been part of a breadth of considerations necessary for finance professionals to keep businesses going.

Focusing on the core skills

The optimistic view is that the worst of the pandemic, in the UK at least, has passed. The economy should become increasingly liquid, a bottleneck of reserved investment should begin to release, and businesses will likely demonstrate revitalised confidence and eschew necessary risk-averse behaviours from the past 12 months. The question that must be asked, however, is what have we learned about financial management throughout the pandemic, and how can it be applied to the profession even in a return to ‘normality’? One of the crucial lessons of the past year has been that there is no inopportune time for finance professionals to refine their core, fundamental skills.

It is important to elaborate that the University of Manchester’s newly launched MSc in Financial Management, unlike many other academic programmes, has not had to be rewritten on the basis of the pandemic; instead, its key guiding ideas have been emboldened. Those with a robust knowledge of fundamental and broadly applicable finance concepts and instruments will likely have fared best over the past year, relative to those specialising in managing the economy of specific sectors or individual businesses.

In this case, skill and talent are twin forces underpinning the success of a financial management team. Naturally, hard skills will be critical, but soft skills are equally essential in a challenging situation. For instance, the ability to communicate effectively and efficiently, with consideration to the challenges and anxieties faced by other people within the organisation, will have been vital in protecting morale and executing plans. The development of such soft skills is an integral part of the learning outcomes of the MSc Financial Management.

Grappling with these issues will leave finance professionals well-placed to handle the period of recovery over the coming months and years. Recognising successes and failures and addressing those gaps in skillsets uncovered by the pandemic, will be of great importance not only in the instance of a further crisis at some point down the line, but in the day-to-day management of their business under more predictable conditions.

Professor Arif Khurshed is a Professor of Finance within the Division of Accounting & Finance at the Alliance Manchester Business School. Prof Khurshed lectures at part of the University of Manchester’s blended learning MSc in Financial Management, which equips its students with a deep understanding of the tasks finance professionals undertake, and the skills required for a successful career in finance.

The policy will come into effect next month in a bid to lift other Covid-related rules at the firm, such as social distancing and the wearing of face coverings. The company has already introduced “vaccine-only” workspaces within some office departments, though in the near future, employees who are not yet fully vaccinated will be expected to continue working remotely, despite calls by Morgan Stanely’s CEO James Gorman for staff to return to the office.

Currently, the policy operates on an honour system, though in the near future the bank may decide to ask its employees for proof of vaccination status. Mr Gorman has said if his employees are able to dine in restaurants around the city, then he sees no reason why they cannot return to the office. The CEO has also said that he would be “very disappointed” if US workers had not made the return by September. Several other banks are also taking a tough stance against home-working. Jamie Dimon, CEO of JP Morgan, has recently said he wants US employees back in the office from July.

Shifting your employees to home working at the start of the pandemic may have been difficult, given the speed at which it had to happen and the less developed understanding we had of COVID-19 at the time, but going back to the workplace is even more complicated. It requires employers to balance a number of factors, which are outlined here.

You need to keep your employees safe

As an employer, you have a legal obligation to prioritise the health and safety of your employees. This is also important purely from a business perspective, especially if you’ve supported them during the furlough period, investing in the long term retention of talent. Healthy adults of working age have a low risk of dying from the currently active strains of the virus, but there is also a risk of them suffering long-term disability due to long COVID, developing chronic lung problems, or developing a mental illness or neurological problem – something found to affect one in three infected people.

You need to be ready to run a minimal-risk workplace

Before you bring employees back into the workplace, you will need to do an assessment to work out how you can best implement social distancing and additional hygiene measures across your premises. Current government guidelines are that every on-site worker should receive at least two lateral flow tests per week to reduce the chance of infection spreading between employees, and anyone who has been in contact with an infected person should self-isolate, which means it’s a good idea to keep home working as an option. These measures apply even to fully vaccinated individuals.

You need to consider the impact of lockdown

On the flip side of this, spending a long time in lockdown has had a negative effect on many people’s mental health, and getting your employees back to normal – as much as possible – can itself be important to their well-being. It will be all the more important to use drug and alcohol workplace testing because addiction rates have risen during this time. You may need additional training options to brush up on neglected skills, and a more relaxed approach to short breaks in order to help returning workers readjust.

One size may not fit all

If you have employees who are at high risk from the virus, or who live with people at high risk, equalities law may require you to let them keep on working from home. There are advantages to this which go beyond their well-being, as their absence can make it easier to accommodate workplace social distancing. Bear in mind that a lot of people have lost loved ones to the pandemic and some of those people may not feel able to return to the workplace yet but may be happy to work from home.

It’s probable that we never will quite go back to normal after all this, but that’s not necessarily a bad thing. Smart employers will take the opportunity to make positive changes to how they go about their work.

Finance Monthly hears from Giles Coghlan, Chief Currency Analyst at HYCM, on what UK investors should keep their eyes on as June approaches.

As pubs, restaurants, shops and gyms all over the country begin to re-open their doors, all eyes are on the UK’s post-pandemic economic recovery.

For one, there is a sense optimism throughout the country. The rollout of the COVID-19 vaccine is on course (half of UK adults have now had at least one jab) and social distancing measures are being relaxed. Unemployment has fallen at the start of 2021, while inflation is holding steady.

As with any major societal change, all these things are naturally impacting the financial markets. The construction industry, for example, is experiencing strong growth as a backlog of projects spark back into life, and we can expect to see similar trends in other sectors as more retail, hospitality and leisure establishments re-open.

With all this in mind, here are some key themes and developments that investors should watch in the months ahead.

Stock markets

Throughout the pandemic, the so-called FAANGs stocks of Facebook, Apple, Amazon, Netflix and Google have been central to the US stock market’s record bull run. As investors have pumped huge sums into global equities, the tech giants have been among the greatest beneficiaries of the stay-at-home economy.

Given that stocks have generally been on a great run higher since March last year, with record highs and strong returns, investors must now seriously consider just how sustainable this pace is. In particular, traders and investors should watch for a seasonal shift, which might mean that these stocks lose their bite. One possible scenario could see the old adage “sell in May and go away” ring true, with the arrival of the summer months prompting investors to exit their stocks.

As investors have pumped huge sums into global equities, the tech giants have been among the greatest beneficiaries of the stay-at-home economy.

Further, as more lockdown restrictions are removed, naturally, society at large will be less dependent on tech to go about our lives as normal. As such, it will be interesting to see how tech stocks will fare throughout this period, and whether they become a less appealing prospect to investors.

Meanwhile, traders should also monitor the performance of stocks in the retail, hospitality, retail and leisure industries as the UK progresses on its roadmap to ease the lockdown. Companies in these verticals could achieve impressive growth when life returns to something resembling normality.

Gold

As the US economy begins to awaken, US bond yields have been on the up, meaning that Gold Exchange Traded Funds (ETFs) have continued to fall. This is a trend that should please the Fed, and is reflective of a far more optimistic outlook.

Particularly as expectations of life as normal inch closer, should the US economy continue to improve, rising yields will no doubt put further pressure on gold, which has already seen one of its worst starts to the year in 20 years.

Ordinarily, the beginning of the year is a period of strong demand for the precious metal, with the Chinese New Year usually attracting gold buyers. From a seasonal perspective, for the past ten years, gold has been flat between April and June; with the 2013 taper tantrum, gold lost nearly 20% between March and September alone.

Consequently, traders should watch for a possible sharp sell-off in gold should the Fed begin to talk about tapering.

BTC and cryptocurrencies

There has been strong media attention on cryptocurrency in recent months, with talk of Bitcoin garnering significant headlines. This is unsurprising, given that Bitcoin’s market capitalisation is now valued at a remarkable $1.2 trillion, putting the cryptocurrency ahead of Mastercard, PayPal and Visa combined.

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Even accounting for a recent blip, the crypto boom is noteworthy. It will be interesting to monitor how long these gains will continue.

In recent weeks, it is important to note that Bitcoin’s latest valuation came in at the same time as Coinbase launched an initial public offering – making it the first firm of its kind to do so. The arrival of Coinbase now offers many equity investors a straight bet into the cryptocurrency landscape, which could be met with strong gains in Bitcoin.

No doubt, this is a significant event in the busy cryptocurrency market – one that investors and traders should keep up with in the coming months.

When lockdown was announced more than 12 months ago – an entirely new concept that brought with it a multitude of unknowns and an unpredictable, unstable future – businesses barely stopped for breath before they adapted and pivoted to the new landscape. Small businesses, in particular, responded to the global crisis with a clear demonstration of their versatility, creativity and tenacity.

Restaurants offered take away for the first time. Retailers launched Click and Collect services. GPs switched to telephone and video appointments. Gin distilleries halted production and adjusted their production line to make antibacterial hand gel. Textile factories began producing scrubs and face coverings to protect front-line workers. Tech firms invested in building medical ventilators to help save lives. After a very long 12 months, this level of quick thinking and innovation, as inspiring as it was, already seems a rather distant memory.

However, while agile businesses made big changes to support customers and the wider community, some parts of the financial services sector found it difficult to keep up. Regulation and legacy infrastructure, along with good old-fashioned risk mitigation, meant some banks, in particular, struggled to consistently respond to changing customer needs and expectations.

However, they did not stand back and accept defeat. In fact, in crisis mode, banks rapidly changed their digital trajectory. According to research we commissioned last November, the pandemic caused more than half (58%) of banks to change their IT infrastructure plans. And to get new solutions to their customers quickly, more banks than ever saw the valuable opportunity of third-party collaboration.

Tackling the banking challenges together

Working closely together with FinTechs and financial utilities, banks have been able to deliver new digital accessible solutions to meet the needs of their retail and corporate customers. Now, looking ahead to what 2021 and beyond holds, the new challenge is to ensure the innovation and collaboration that became necessities in 2020 become the norm, rather than another distant memory or passing phase.

In November 2020, Banking Circle spoke to 300 C-Suite decision-makers at Banks across the UK, DACH (Germany, Austria and Switzerland) and Benelux (Belgium, The Netherlands and Luxembourg) to discover the specific challenges they face - internal, external and COVID-induced - in future-proofing their organisations and enhancing customer propositions. Published in a white paper ‘Better business banking: Collaborating for success’, the research reveals that existing IT infrastructure is the biggest internal challenge holding banks back from achieving their business objectives.

Unencumbered by such legacy systems, FinTechs have been able to serve consumer and corporate customers efficiently and at low cost in many areas, often competing with traditional banks. But banks have been quietly preparing to fight back - they have been changing their business practices, culture and technology to remain competitive and provide their customers with the solutions they need for today and tomorrow.

Barriers to better banking

Banks have big ambitions; as previous Banking Circle research revealed in 2020[1], most already had digitalisation plans in place, pre-COVID. However, having been built in very different times, with vastly different technology available, not to mention almost unrecognisable customer requirements, banks now face a multitude of challenges in futureproofing their offering.

Here are a few take-outs from our November 2020 research:

• 42% said existing IT infrastructure is one of their three biggest internal challenges.
• Lack of integration with customer-facing departments was a key issue for 40% of banks.
• High customer expectations are the most common externally focused difficulty faced by banks, with 39% saying this was one of their top three external challenges.
• Working from home operations, an area where COVID-19 has changed priorities for individuals, businesses and banks across Europe, came in a close second, with 38.7% of banks placing it in their top three.
• Regulation is challenging 34% of banks, but less than a third (30.7%) say impending recession is a top challenge.

2021 has brought with it many new regulatory challenges, particularly regarding cross border trade. The UK’s exit from the European Union has resulted in significant change, much of which was still to be determined at the time we surveyed European banks. On top of this uncertainty, CBPR2 electronic messaging requirements for card issuers have now come into effect, adding complexity and requiring compliance investment.

These and other operational challenges are sure to impact profit margins, affecting small businesses’ ability and willingness to pay traditional high fees for cross border payments. And with the global digital economy now vital to many enterprises’ survival, this could drive a push towards more affordable solutions from alternative providers. It is unsurprising, therefore, that 70% of the banks we surveyed consider cross border payment provision to be a core banking service. This rose to 90% among UK banks, perhaps reflecting the anticipated consequences of the country’s exit from the EU.

As the pandemic continues to call the shots around the world, recovery feels painfully slow and uncertainty persists. Now more than ever, therefore, banks need to find cost-effective ways to support business customers whatever the future brings.

Clearing the way for cross border trade

Just over half of the banks in our study confirmed that they use direct clearing through central banks to process cross border payments. A similar number use the correspondent banking network, and around one in three use the SWIFT network.

As global trade levels begin to pick back up to pre-COVID levels, banks must be ready to support businesses in their bounce-back. Access to affordable, friction-free cross border payments will be essential to that recovery, and banks able to provide this can empower even the smallest merchant to serve customers in any geography. Not only will this help small businesses and start-ups to thrive post-COVID; it will also bolster international economies at a time when they are in great need.

Working with third-party service providers is now an important part of banks’ business planning. Half of those surveyed already have partnerships or plan to work with an external provider within the next month. An additional third have partnerships on the agenda for the next 12 months.

As the pandemic continues to call the shots around the world, recovery feels painfully slow and uncertainty persists. Now more than ever, therefore, banks need to find cost-effective ways to support business customers whatever the future brings. And the support needs to be convenient, accessible and, above all, valuable. Solutions need to be investment-light yet deliver strong innovation, flexible enough to meet rapidly shifting expectations and needs.

2020 brought an increasing trend towards collaboration. Now to meet these evolving business needs, collaboration must be embraced to bring benefits for all sections of the financial services sector. Through partnerships with infrastructure providers banks gain the agility and innovation of a FinTech, while FinTechs gain compliance and security processes, enabling them to focus on building strong customer relationships.

The 2020 legacy

In the past 12 months, banks and payments businesses alike found the fastest way to get essential new solutions to their customers was to work with an expert who had already developed the solution from end to end. And to see how the banking industry stepped up and responded to the crisis was truly inspirational. Priorities and budgets were shifted overnight, digitalisation plans were dramatically fast-tracked to deliver the solutions customers needed, support staff set up call centres at home. It was far from easy, but the pandemic helped banks find the motivation they needed to future-proof their processes and solutions through collaboration.

Now is the time to reap the benefits. In the face of unprecedented challenge, banks stepped up and set the precedent for future-proofing banking. And that must be the legacy of 2020: better business banking. 

To download the Banking Circle white paper, go to https://www.bankingcircle.com/whitepapers/better-business-banking-collaborating-for-success. 

[1] Source: Banking Circle white paper: Bank to the Future - https://www.bankingcircle.com/whitepapers/bank-to-the-future

The UK economy is predicted to grow at the fastest rate since the second world war this year, according to a widely cited economic forecaster.

The EY Item Club has upgraded its forecast for GDP growth during 2021 from 5% to 6.8%, which would mark the fastest annual growth since 1941. This comes in the wake of relaxing COVID-19 restrictions and optimism that rapid progress with the country’s vaccine programme will enable a swift return to business as usual.

Consumer confidence also increased at the fastest rate in a decade during the first quarter of 2021 on this vaccine-driven optimism. The EY Item Club added that the improved short-term outlook means that the UK economy is expected to return to its pre-pandemic peak by the middle of next year, aided by a surge in consumer spending as households saved during lockdown.

Elsewhere, analysts at Goldman Sachs have predicted a growth rate of 7.8%, stronger than that expected for the US, where President Biden is spurring economic recovery with a multi-trillion-dollar stimulus initiative.

Further pieces of data have added to observer optimism for the UK economy. Item Club analysts revised down their unemployment forecasts from 7% to 5.8% by the end of the year, and the HIS Markit/CIPS Purchasing Managers’ Index found that the service sector grew faster than manufacturing in April for the first time since the pandemic began.

"The UK is primed for a sharp snap back in consumer activity,” said Ian Stewart, chief economist at Deloitte.

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"High levels of saving, the successful vaccination rollout and the easing of the lockdown set the stage for a surge in spending over the coming months."

The UK economy shrank by 9.9% in 2020, the worst performance among the G7 and the steepest annual decline seen in the country since records began.

The FTSE 100 rose on Wednesday, rallying after a mass sell-off led to a 2% fall in the previous session.

The index rose 0.6%, lifted by oil giants BP Plc’s and Royal Dutch Shell’s respective gains of 2.0% and 1.7%. The surge followed a report from Azerbaijan’s energy ministry said BP’s oil output reached 5.9 million tonnes in the first quarter.

Some stocks continued to slip, however. Just Eat Takeaway.com fell 4.2%, slumping to the bottom of the index, following news that rival Uber Eats plans to expand into Germany.

Meanwhile, data published on Wednesday indicated that inflation in the UK rose to 0.7% in March, in line with expectations.

The FTSE 100’s positive performance follows a sell-off on Tuesday that led to major indices in Europe and Asia closing as much as 2% in the red. US markets were also negatively affected, though not to such an extent; S&P 500 futures and Dow Jones futures were flat, while Nasdaq futures fell 0.1%.

The sell-off appeared to be triggered by anxiety over rising COVID-19 cases in India and elsewhere, and their implications for the economy. IAG dived by 8.1% on concerns over travel plans being scrapped, while hotel operators Whitbread and Intercontinental lost 4.8% and 4% respectively.

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Overall, around £37 billion was wiped off the FTSE 100 on Tuesday.

While the London-based index rallied on Wednesday, Germany’s DAX and France’s CAC 40 respectively gained 0.2% and 0.4% by mid-morning.

China’s economy grew a record 18.3% in the first quarter of 2021 compared to the same period in 2020, new data has shown. Growth was also up from 6.5% in the fourth quarter of 2020.

The results mark the biggest jump in Chinese GDP since quarterly records began in 1992. However, the economy’s growth fell short of the 19% mark predicted by a Reuters poll of analysts.

China, which boasts the second largest economy in the world, was the only major nation to experience economic growth in 2020 amid a strong bounce back from the COVID-19 pandemic, maintaining high retail spending and exports.

European stocks were boosted by the news, with the FTSE 100 rising 0.5% after opening on Friday morning – rising above the 7,000 points level for the first time since February 2020. France’s CAC and Germany’s DAX also rose 0.2% and 0.3% respectively.

Asian stocks were also lifted by the news, with Japan’s Nikkei climbing 0.1% while the Hong Kong Hang Seng rose 0.6%.

US futures, however, saw a slump as European trading opened. S&P 500 futures were down 0.1%, Nasdaq futures were down 0.2%, and Dow futures were flat. The indexes’ gloomy outlook followed a day of near record highs as US economic data indicated a solid global recovery from the pandemic-induced recession.

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“The national economy made a good start,” a spokesperson for China’s National Bureau of Statistics said on Friday, attributing the spike in GDP to “incomparable factors such as the low base figure of last year and increase of working days due to staff staying put during the Lunar New Year” holiday.

"We must be aware that the Covid-19 epidemic is still spreading globally and the international landscape is complicated with high uncertainties and instabilities,” the Bureau cautioned.

High streets around the world have been in decline for many years, with the likes of Amazon as well as other online retailers squeezing many high street vendors and retailers out of the market. Recently however, with people making the switch to home working, things may be changing.

All retailers have been susceptible to the huge rise of online shopping and the COVID-19 pandemic has only accelerated this.

Illya Shpetrik, a USA-based fashion and entrepreneur, has commented on this, saying: “Online retail, be it in fashion or otherwise is of course here to stay. However, people remain keen on their local high streets, which serve an essential purpose. The local high street has changed and adapted itself over many years and will hopefully be here to stay.”

Illya Shpetrik continued: “Online retail and physical stores and shops on the high street will ultimately learn to co-exist side by side. They will both always be there in one form or another. They also relate to certain value we all have. For example, growing up, in the Shpetrik household, we always went to our local grocery store for certain items but to the larger retailers for other goods. This is how high streets and online retail will likely learn to co-exist.”

With more people than ever working from home and with people’s savings and disposable income in the UK and around the world growing, there are billions of pounds and dollars waiting to be spent. Significantly, with people changing so many of their daily and work habits as a result of the changes to how and where we work, it is city centres which are feeling the greatest pinch.

City workers are not in town and city centres in anything close to the numbers they were throughout 2019. However, although many habits and practices have changed as a result of how we are all now working, hose who would go out daily in busy city centres to buy food and other items may still do so in their local high streets. Therefore, at least a portion of what they would otherwise have spent is being spent in local high street shops as well as online.

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Many people have also seized the opportunity of having to work from home and changed their place of abode and work entirely. Co-living spaces, for example, are increasing in popularity, with many empty city centre premises being transformed into innovative co-living and co-working spaces. A key benefit of these spaces is that with micro-communities under one roof, work, business and leisure are combined conveniently in city and urban centres.

This is a significant shift in people’s work-life balance, with people turning to city and town centres to live as well as work in a way never seen before.

On this, Illya Shpetrik commented: “Everything has, in a sense been turned upside down. Previously, it was work in the city centre and live and relax in suburbs and in and around local high streets. This has however become skewed in recent times with co-living spaces for living and work springing up in city centres and shopping now taking place like never before, once again, on high streets.”

US stock indexes were set to rise on Wednesday following positive earnings reports from investment banks.

JPMorgan Chase & Co and Goldman Sachs Group Inc both beat analysts’ expectations for first-quarter profit.

Goldman saw its overall investment banking revenue jump 73% to $3.77 billion, the highest amount seen since 2010. The bank managed to effectively capitalise on record global investment banking activity, which Refinitiv data showed as reaching an all-time high of $39.4 billion in the March quarter.

Meanwhile, JPMorgan, the US’s largest bank, reported earnings as having leapt almost 400% in the first quarter of the year. Like Goldman, it saw immense growth in its investment banking revenue, which jumped 57%.

JPMorgan reported that consumer spending in its businesses had reached pre-pandemic levels and risen 14% above Q1 2019.

Shares in Goldman rose 1.5% on Wednesday, while JPMorgan’s shares fell 0.6% despite its almost quadrupled revenue. The share slip came as the bank released over $5 billion it had set aside in reserves against COVID-19-prompted loan defaults.

Goldman easily held on to its first-place ranking for global M&A advisory, while JPMorgan overtook Morgan Stanley as the world’s second biggest advisor.

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It was also revealed on Tuesday that Goldman Sachs plans to expand operations to Birmingham this year. The bank expects to recruit “several hundred” people across the divisions it builds, beginning with an engineering department that it will fill through a combination of new hires and employee transfers.

Finance Monthly hears from Menzies LLP business recovery partners Simon Underwood and John Cullen on how owner-managers can overcome restart anxiety.

During the pandemic, a £407 billion support package has enabled many UK businesses to maintain a healthy cashflow and survive to fight another day. However, with the end of Government support on the horizon, many owner-managers may be experiencing ‘restart anxiety’ and be putting off the important decisions needed to future proof their businesses.

By spotting financial red flags and conducting effective scenario planning, owner-managers can take steps to turn their fortunes around and improve their chances of performing successfully when they reopen. They should also investigate their eligibility for the Government’s new Restart Grant, which could provide them with a much-needed cashflow boost over what may be the final few months of lockdown restrictions.

Owner-managers that fail to prepare for the end of coronavirus business support measures could be facing a cliff-edge scenario in a few months’ time. Being able to spot key signs of business stress is essential, allowing them to take action to improve their financial position and rebuild a stronger business.

For example, if owner-managers seem to be spending more time worrying about the business than they do running it, have noticed a dramatic drop in revenues or have paid dividends without sufficient reserves to cover them, action might be needed before it’s too late. Other signs of trouble could include a lack of communication with creditors or an inability to pay debts on time.

Scenario planning can help owner managers to get back on the road to recovery by planning for a number of ‘what if’ scenarios. Three-way cashflow forecasting involves combining a business’ profit and loss accounts, balance sheets and cashflow. In the current uncertain economic environment, this tool can help to facilitate informed decision-making about the business’ future by improving the visibility of costs across the company. This type of cashflow management can also help to convince creditors to flex their payment terms by providing them with greater confidence about when payments can be expected.

Scenario planning can help owner managers to get back on the road to recovery by planning for a number of ‘what if’ scenarios.

To understand if they will be able to operate sustainably once Government-backed support such as grants, loans and the furlough scheme come to an end, business owners must be able to assess their long-term viability. To do this, they should ask themselves questions across four key areas; cashflow, innovation, communication and protection.

For example, questions around cashflow might include asking whether there is enough cash in the bank to pay any outstanding bills and whether there are any outstanding debts that could be called in. ‘Innovation’ should include a consideration of areas such as whether the business is doing enough to adapt to the new normal for its marketplace and take advantage of areas of demand, such as eCommerce. Key questions around communication might include asking how regularly owner managers are keeping in touch with key customers and suppliers, and whether the business is reaching out to lenders if it’s experiencing cashflow difficulties. Finally, ‘protection’ questions might include whether the company has the right insurance cover, including unrestricted business interruption insurance, and whether the owner manager understands their options if the organisation is in cashflow difficulty.

Announced in the Budget on 3 March 2021 and introduced from April, the Government’s new Restart Grant could provide around 700,000 UK business owners with an injection of cash during what is hoped to be the final stage of lockdown restrictions. Replacing the monthly Local Restrictions Support Grant, which closed at the end of March, the grant is aimed at helping businesses that have had to close as a result of lockdown restrictions during the pandemic through to 21 June – the date currently in place for the lifting of lockdown restrictions in England.

Under the scheme, non-essential retail businesses can claim up to £6,000 per premises to help them reopen, while those in hospitality, accommodation, leisure, personal care and gyms can receive up to £18,000, depending on rateable values.

To be eligible to claim under the scheme, businesses must be based in England, occupying property on which they pay business rates and must have been required to close because of the national lockdown from 5 January 2021 onwards, or between 5 November and 2 December 2020. The business must also have been unable to provide its usual in-person customer service from its premises. Owner managers can apply for the grant by visiting their local council’s website.

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In order to see the true picture of their business’ cashflow, it is vital that owner-managers have the key numbers at their fingertips. By having access to accurate profit and loss balance sheets and other core management data they will be in a better position to make important decisions about their business’ future. Owner-managers should also consider seeking the support of experienced insolvency practitioners, who can help owner managers in assessing the business’ viability and talk through its options for getting back on the road to recovery.

While the rollout of the COVID-19 vaccination programme is creating a light at the end of the tunnel for the UK business landscape, the pandemic is far from over and it’s crucial for owner managers to ensure they’re cash-ready for the end of Government support measures. By carefully assessing their financial position and viability, scenario planning and investigating their eligibility for the Restart Grant, owner managers can take back control and prepare for a successful restart.

Non-essential shops and services have reopened across England and Wales as lockdown rules are eased across the UK.

Gyms, hairdressers and zoos can now reopen, while pubs and restaurants are able to host customers in outdoor areas. Prime Minister Boris Johnson has urged people taking advantage of the eased restrictions to “behave responsibly” and continue to exercise advised steps to reduce the likelihood of contracting or spreading coronavirus.

Non-essential shops have been closed since 5 January when a third national lockdown was announced in England and similar measures imposed across the devolved nations. This new easing of restrictions coincides with the relaxing of Northern Ireland’s stay-at-home orders and other restrictions in Scotland and Wales.

58% of small businesses predict that their performance will improve this quarter as a result of these slackening restrictions, the highest proportion since the summer of 2015. Conversely, fewer than 24% anticipate a fall in sales.

“We’ve seen a phenomenal increase in bookings since the government confirmed restaurants can open on Monday,” said Patrick Hooykas, managing director of TheFork, formally known as Bookatable. “This week alone we’ve seen an 88% uplift in bookings.”

The pound also opened the week holding steady following heavy losses in the days prior. The GBP/EUR exchange rate fell over 2% over the past week before settling at €1.1514 on Friday.

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As of 05:16 UTC on Monday, GBP/EUR was trading -0.03% at €1.1509.

More than 32 million UK residents have now received a first dose of a COVID-19 vaccine. Last Sunday saw a reported seven deaths within 28 days of a positive COVID-19 test, the lowest daily total since 14 September.