Less than a fifth of South West businesses believe they will cope with 6 months of crisis

Business West Covid Survey

Only 16 per cent of SW businesses believe they will be able to cope if coronavirus crisis lasts for six months

A new Chamber of Commerce survey of more than 1,100 South West businesses highlights the un-paralleled scale of the economic impact being faced by companies grappling with the coronavirus pandemic.

The survey, conducted between 2nd-17th April by Business West Chamber of Commerce – the South West’s largest business membership organisation – shows a high number of firms with concerns about their current and future financial position, whilst confidence in their ability to survive falls sharply when asked to consider the continuation of lockdown measures.

When asked the question: “Do you have concerns about your financial position due to the impact of COVID-19 currently or in the future?” 62% of all firms said that they had concerns currently, whilst 88% said they were concerned about their future financial position.

The survey asked for their views on the viability of their business if the current crisis continues. This show a very steep decline in their confidence of their ‘ability to cope’, which gets sharper as it moves from one, three and six months, up to a year.

Small firms are reporting worse financial impact and greater pessimism about the future than larger firms. The band of small businesses with 5-9 staff are most pessimistic about their ability to cope over three, six and twelve months, with only 11% saying they would be able to cope over six months – dropping to 5% over twelve months.

Ian Mean, Director of Business West in Gloucestershire said“Our survey spells out just how hard many firms are being hit – the impact of the coronavirus is far worse than the financial crisis of 2008 or any recession we can remember. These are critical weeks for the economy and for the fate of many firms. We are hearing from the coalface stories of firms, built up by individuals over decades, now looking into the abyss.

“We found plunging confidence in businesses’ belief in their ability to survive over a more prolonged period, particularly among small firms. This is a stark reminder of the potential depth of this crisis, with the damage to business risking being cumulatively greater the longer the crisis continues.

“Any exit plan from the current lockdown must be led by the science and by the need to save lives. However, our findings suggest that uncertainty and lack of clarity from government may be exacerbating a crisis in confidence in small companies’ view of the future. A longer lockdown period would mean we need government support to step up a gear and critically to address the gaps in support for those companies that find themselves unable to access current government support programmes. Firms falling through cracks in support packages for a few weeks can be managed, but when these weeks start to become months, they cannot be left unsupported.”, Mean said.

As well as individual firms’ cash flow and viability, the survey also underscored that, even with the government’s generous furlough scheme, many businesses were still taking measures to cut labour costs in order to survive.

The survey found that 37% of all firms said they would be taking or considering taking other measures to reduce labour costs. Of these 37%, the most common actions firms had already implemented or were considering implementing were:

  • 79% reducing working hours
  • 65% reducing salaries
  • 60% cutting back on contracted workers
  • 48% voluntary unpaid leave
  • 47% starting redundancies for staff with under two years’ service
  • 33% starting redundancies for staff with over two years’ service

Ian added“The furloughing scheme has been a massive lifeline for many firms, but the shock of this economic crisis looks likely to lead to major damage in the labour market and with individual workers. Government now needs to think about how we ensure this damage is only temporary and firms are able to drive a recovery that gets back to our previous excellent regional jobs performance.”

Top answers to the question: “In what ways has your business been affected? (tick all that apply)” were:

  • 72% had seen decreased orders and sales
  • 56% had lost business due to cancelled contracts or orders
  • 50% reported cash flow issues
  • 30% reported supply chain issues

Greg Pilley, Managing Director of Stroud Brewery, an independent organic brewery and taproom in Stroud, Gloucestershire responded to the survey and comments: “We could be worse, and we are certainly grateful for the furlough scheme.

“My estimate is that we are certainly fine for the next three months. We are maximising what we can do online but the real challenge will be when we start looking at opening up again with all the overheads and suppressed trading conditions.”