How COVID has affected UK businesses – and what happens after July 19
Britain will finally be freed from most of the restrictions placed on it during the pandemic from July 19 (and Northern Ireland from July 26). Knowing that the majority of the adult population has been doubly vaccinated, authorities are removing almost all legal restrictions on social contact.
What does this mean for businesses? Is the worst over now? Can anyone get back to running the successful businesses he ran before the pandemic, generating tax revenue for the hard-pressed Treasury to repay the £ 372 billion he spent to support the country through COVID- 19?
At the start of the pandemic, trade watchers, myself included, were calling out sectors that we thought would do well – or badly – as restrictions were imposed. Some areas did not need a crystal ball to make an accurate prediction.
All restaurants, pubs and clubs were closed in 2020, and every music festival and physical conference was canceled. With restrictions continuing well into the second half of 2021, it is therefore not surprising that the sectors with the highest leave rates, as of May 31, are accommodation and food services, at 34% (133,000). of eligible workers put on leave, and also arts, entertainment and recreation, with 29% (41,700) on leave.
Cash flow, where it could be found, supported some of these businesses through tough times. To give just one example, the Soho House Members Club (full disclosure: I am a member) asked members to continue paying their subscriptions monthly during the two periods it had to close, but credited the sum to their accounts to spend. when it reopened.
This ensured that 92% of members remained enrolled in 2020. With more than 59,000 applicants for membership as of May 30, 2021, Soho House – the holding company now renamed Membership Collective Group – has emerged from the pandemic in enough in good shape to be launching its IPO in the US this week, valuing the company at US $ 2.8 billion (£ 2 billion).
Retail and travel issues
While the food retail business has exploded – and is on the decline now that we all go out to eat again – other retail businesses, especially those anchored on Main Street, have had a long history of closings. Arcadia, Victoria’s Secret, TM Lewin, Jaeger, Harveys Furniture, Bonmarché and many more found themselves under administration despite 100% trade tariff relief and many other government initiatives to help them.
Department stores and malls were already struggling, especially with online competition, and a pandemic was the last thing they needed. In 2020, total retail sales volume declined 1.9% from 2019, the largest annual decline on record.
International travel remains a very depressed industry and the July 19 freedoms will not help much, with the United States and many other parts of the world remaining closed to British nationals. Many flight crews remain on leave and British Airways, already one of the biggest recipients of leave money, began putting staff back on leave in June as the horizon for resumption of travel stretched further.
My local airport, Edinburgh, recorded its lowest passenger count since 1995 in the past 12 months, and the outlook remains bleak. The airport handled just under 3.5 million passengers in 2020, a 76% reduction from the previous year. It is estimated that this has cost the Scottish economy around £ 1 billion and over 21,000 jobs. Flights to, from and throughout the UK, which in 2019 were between 5,000 and 6,500 per day, are currently only 1,000.
There have been predictable successes, of course. Amazon, Royal Mail, Hermes, DPD – anyone who delivers to your door – have all done well. If you make cardboard in the UK, it’s been 12 to 18 months, a record.
But there were also areas where things went much better than expected. Debt collection companies, for example, had anticipated the problems of so many people who could lose their jobs, but instead saw much better collection rates because those who couldn’t get out and spend paid off their debts instead. . Arrow Global, the debt and alternative asset recovery firm that is being engulfed in private equity, said that in the first quarter of 2021 it raised more than 6% more than expected.
People stuck at home with more disposable income than usual weren’t just paying off their debts – they also noticed their home needed fixing, which prompted companies like Howden Joinery to announce a profit warning – on the rise. The company forecasts pre-tax profit of £ 300million for 2021, up 62% from £ 185million in 2020.
Meanwhile, business start-ups did not suffer in 2020 – 772,002 new businesses were started in the UK, up 13% from 2019. Many were in industries that benefited from the pandemic , such as manufacturers of personal protective equipment (PPE) or disinfectants, camp food sites for all restaurateurs, and take-out businesses.
The leave scheme also kept unemployment at bay, contrary to expectations. In April 2020, the worst month for economic activity in the entire pandemic period, the government’s Office for Budget Responsibility (OBR) released a baseline scenario where unemployment would peak at 10% in the second quarter of 2020, falling at 8.5% and 7.0% in quarters 3 and 4. In fact, the highest unemployment rate in 2020 was 5.1% in quarter 4.
So what will happen when the restrictions are lifted on Monday? Can we look at summer 2020 as an indicator of the changes that will take place?
In 2020, after restrictions were eased in June, overall retail sales quickly returned to pre-pandemic levels, while hospitality and entertainment saw a much slower or no recovery – despite the government Eat Out to Help Out program. In January and February 2021, when non-essential retail outlets closed again, sales were again affected, but the drop was much smaller than in early 2020, suggesting that retailers and consumers alike were falling. were adapted to the restrictions.
So I’m not predicting that July 19 will make a big difference to general retail. However, if you are in a business of live events – music festivals, theater, conferences and of course the great UK wedding industry – then July 19th is the date when you can finally start over.
Expect an increase in demand, as unlike last year, the limits for gatherings are now going. Combined with the forced savings many have made over the past 18 months, this could see the average marriage surpass the £ 31,000 it would have cost in 2019.
I could be wrong, of course. In March 2020, commentators in the investment banking industry predicted a fee drop of up to 50% in the first six months of the year and believed that hundreds of investment bankers would lose their jobs.
What really happened was that global investment banking fees in 2020 reached US $ 127.5 billion, an increase of 18% from 2019, and the strongest annual period since the record began in 2000. In the UK, investment banks grossed a total of £ 4.9 billion in 2020, marking a 3% increase from 2019. This was helped by a increased activity in capital markets in the second quarter as companies rushed to refinance and consolidate liquidity, generating high fees for bankers.
Globally, lenders earned $ 42.9 billion in underwriting debt in 2020, up 25% from the previous record a year earlier. Things continued in this vein until 2021. During the first quarter, when IPOs and private equity offerings for public companies hit record highs, investment banking fees hit. $ 39.4 billion, the highest overall quarter on record.
Maybe the predictions aren’t that easy after all.