In the last week, the Chancellor Rishi Sunak has all but confirmed the fears of businesses and SMEs across the UK by warning that the UK faces a ‘significant recession’ as a result of the coronavirus outbreak.
The recent figures state that the UK’s economy has shrunk by 2% in Q1, and GDP was down by 5.8% in March. The data released by the Office for National Statistics also states that the accommodation and food service industries have been most affected by the nearly two-month lockdown imposed in the UK.
While these figures are actually lower than some experts predicted and are more favourable compared to other economies in Europe such as Italy, France and Spain, it must be noted that the UK went into lockdown later than many other nations, thus producing lower drops in Q1.
In light of this, it is expected that the UK will face a “more historically significant” contraction in economic activity in Q2.
But what exactly does this mean for large businesses and SMEs in the UK? While economic activity taking a downturn is set to impact the entire country, it remains to be seen how individual companies will react, and in some cases, whether they will even survive this crisis.
Drawing light comparisons to the 2008 banking crisis
Throughout the coronavirus pandemic and subsequent closure of many trading businesses across the UK, the phrase ‘worst since 2008’ has been bandied around in regards to the economy. This, of course, referring to the great recession in 2008.
While the recession in 2008 was fundamentally down to deep-rooted issues concerning regulation and lending in the banking sector, the coronavirus economic response hinges on medical and scientific breakthroughs, as well as increased support for those simply unable to go to work.
Measures introduced by the Government such as extending the furlough scheme for UK employees by a further four months as well as continuing to provide Coronavirus Business Interruption Loans (CBILS) are just a couple of examples of how cash is being offered to give businesses the best possible chance of survival.
Despite more support for businesses in the short term, this rapid expenditure will eventually pose a significant impact on the future of the economy in the UK, much like it did back in 2008.
The importance of agility amidst the coronavirus pandemic
While the economic experts will be busy determining figures and analysing data for the foreseeable future to determine the direct impact of COVID-19, business owners want to know when they will be able to trade again, whether they will be able to pay their employees and other operational costs, and ultimately whether or not they will survive.
The economic impact will prove to be incredibly severe for many businesses. However, we cannot stress enough the importance of adopting an agile mindset both now and in the coming months in order to preserve cash flow and set up the company in the best way possible to come out of the other side.
In terms of operations, implementing and embracing a new mentality that focuses on the quality of deliverance as well as collaboration and respect will go a long way in ensuring continuity. Without this, businesses run the risk of falling behind as a result of their failure to adapt and react to severe market conditions. Read more about our approach to agile mindsets in the workplace here.
Here at MDA Training, we are doing our bit to support businesses and SMEs during this crisis. Our experiential programmes are currently being adapted to aid the remote workforce by utilising virtual and digital methods. In addition, we are regularly posting guidance, advice and tips on our dedicated YouTube channel.