Interruption, Bounce Back.. Recovery?

Covid-19 has unquestionably impacted all businesses, forcing the hand of large public companies and multinationals to take immediate decisions around costs, operations and supply chain resilience, whilst in many cases also requiring a fundamental shift in long term strategy. For the most part they have adapted, repurposed and remained resilient, albeit not without having to eat into their reserves and in many cases take on an unwelcome debt burden.

Without the balance sheet or cash reserves small and medium enterprises along with the self-employed however have felt the hit of lockdowns and supply chain disruptions harder than most. In hospitality and leisure in particular the impact was immediate with revenues disappearing overnight and only through furlough, grants, rent and tax deferrals along with business interruption loans have they been able to limp on, surviving in an uncomfortable state of hibernation. With restrictions now having been eased though and a quasi full reopening of the economy on the horizon SME's will arguably have to prepare themselves for the toughest challenge still to come... The recovery.

For many SME's Covid has forced the focus, driving them to become operationally more efficient, to be bold enough to pivot into new markets and to invest in technology. With a leaner platform to kick off from then many will reap the rewards from the opportunities that will inevitably come from 10% of GDP sitting in excess savings. For many others however the recovery will come with the need to make very uncomfortable choices and take difficult decisions, acknowledging that no longer can extend and pretend be seen as a sustainable strategy.

I have always felt privileged to be able to work with business owners and entrepreneurs day in day out, but have been even more so over the past year. The resilience, creativity and drive shown through so much uncertainty, challenge and change has been remarkable and i can't help but think that in the medium term the impact of Covid will lead to more businesses prepared to innovate, push the envelope and take risks they might not otherwise have done. Yes there have been a quarter of a million SME's that have ceased trading over the last year, and no doubt there will be many more as Government schemes are withdrawn and bills fall due at the end of Q3, but we have also seen dramatic increases in new business registrations. Many of these are coming from a new generation of entrepreneurs who are digitally and technology savvy, passionate about addressing true societal problems, and focused on a social purpose and sustainability.

SME's account for 99% of UK businesses, 33% of employment and contribute over ￡2 trillion in economic output each year, so we simply cant underestimate just how hugely important they are to the recovery of the UK economy and its long term growth prospects. The challenge then that presents the current Government is how to withdraw the economy off heroin (read cheap Govt backed debt) and perhaps onto Methadone (read slightly more expensive Govt backed debt) in the short-term, whilst simultaneously ensuring capital gets to the innovators, visionaries and risk takers. We must then create the conditions for investment and growth to thrive in life and bio-sciences, sustainable energy production and financial technology, whilst genuinely spreading the economic opportunities throughout the country.

Covid-19 has only accelerated the evolution already well underway to a data driven and digitised economy, where the way we consume, transact and interact has fundamentally changed. It has been hugely reassuring then throughout my interactions with business owners in the last year to see not just a focus on cutting costs and shoring up supply chains, but a genuine desire to invest in innovation, create new business models and look at ways technology can better serve customers and solve problems. To hear small business talk about becoming carbon neutral, moving to blockchains, deploying IoT, and even farms moving to cloud-enabled crop management is not only very exciting, but highlights just how SMEs are embracing uncertainty and leading change.

There's a quote often wrongly attributed to Charles Darwin that perfectly sums up the most important skill for businesses today... "It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change".....

It may not exactly feel like it right now and no doubt there will be bumps on the road but UK SME's are adapting at pace, and with the right framework and support will become even important to the future of the UK economy.