Who would have thought that at this time last year, we would be on the brink of encountering an unprecedented global pandemic, one that will go down in the history books.
It feels like a bit of a groundhog day at the moment however, back in lockdown again, hoping that we can see some light at the end of the tunnel. It is not all doom and gloom though. This pandemic has actually bought out the best in many people and businesses.
Speaking with partners and Chairman, David Everatt at Forrester Boyd, one of the leading accountancy, wealth management and corporate finance firms in the Humber and Lincolnshire region, we discuss what they think is in store for 2021.
The biggest challenges for 2021
Uncertainty is the one thing that we can all be sure of. Brexit has finally happened and the UK is now free to mark its own patch. The knock-on effects of Brexit however are only just starting to play out. Some of these impacts will be very short term and iron themselves out such as issues at Customs, whilst other impacts on the likes of agriculture are likely to be more profound and long lasting.
Cashflow too is going to become a potential issue for some businesses as deferred payments and loans kick in, but also as levels of trade pick up again from a low base, there is a risk of overtrading.
The supply chain is another area to keep an eye on. This is a risk area not only because of the impacts from Brexit, but also those businesses who may have been propped up by the grants and support packages offered by Government. When these finally come to an end, there is a real risk that many businesses might just not be viable anymore.
Is working from Home (WFH) here to stay? Maybe not to the extreme that it has been but definitely some hybrid versions of WFH. With an increase in WFH comes the possibility of some businesses downsizing. Why pay rates for large premises when you only have half your staff in half of the time? Many businesses have found increased efficiencies in WFH with reduced travel to meetings and reduced overheads such as lighting, heating and electric. So, there is a potential that we may see some changes in the commercial property landscape.
Another major challenge will be the mental health of employees. With many either furloughed or working from home for extended periods of time employers are going to need to be very supportive of their employees to deal with a myriad of varying mental health issues and concerns about returning to the workplace.
How will debts accrued in 2020 impact on businesses?
This will depend very much on Government policy, and on the strategic planning of the businesses themselves. We were heading towards a cliff edge of debt in early 2021 but this has been alleviated somewhat with the extension of furlough and deferment of loan repayments and other taxes. Looking forward, HMRC need to be careful and consider a taper to the reduction in reliefs or repayment stages of debt to avoid a car crash scenario. Most of the clients that we speak with have been careful to plan ahead to ensure they will be resilient to whatever happens through careful cashflow forecasting and strategic business planning but not all businesses will have had the luxury of being able to do this. For those businesses, it is critical that they look at their cashflow and plan for the short, medium and long term.
The changing face of business and the consumer
We have seen some amazing innovation and resilience over the past 10 months from distilleries shifting production to hand sanitisers and hotels, restaurants and bars offering home deliveries and takeaway services as well as supporting their local communities. Having a flexible and agile business model does help in responding to quickly changing environments.
During lockdown, the likes of Amazon and Royal Mail have never been busier with many people doing their shopping online. We have also seen alongside this the community spirit come into play with many people wanting to support local businesses and help them to survive. Add to this the increase in ethical and socially responsible buying decisions and you have a very different type of customer to what we had 10 months ago. Is this an opportunity for businesses to differentiate and position their offerings to meet these needs?
Social distancing – here for some time
With no immediate end in sight for social distancing, this will continue to have an impact on the way people communicate in a work environment. Many have found efficiencies in hosting meetings through online platforms, however there are those customers who just want to see the colour of your eyes. We all need some form of normality going forward so the return to some face to face meetings will be invaluable, especially in a business development environment. For many B2B businesses it is all about relationships and this needs to come front and centre above all else. Look after your clients and they will look after you.
Financial support – or lack of it
Sadly, not all businesses have been able to adapt or even to continue to trade at all. We are all aware of the devastating impacts on tourism and leisure, but fairgrounds, theatres, actors, entertainers, some self-employed as well as company directors have been left out in the cold somewhat. Whilst we may have had one of the most comprehensive funding packages from Government, there are still some 3 million self-employed people struggling to make ends meet as they did not fit the criteria for support and have slipped into a gaping big support hole. We just hope that Government address this before we lose some amazing businesses and true entrepreneurs.
The ‘B’ word
Brexit was put on the backburner. At the beginning of 2020 it was high on the agenda. Then it fell off a cliff until October. We have all become too familiar with the constant change in direction throughout 2020 and the stop-start of business. Did we really think that Brexit was going to be any different? What we will need to watch out for however will be potential regulatory changes. There will be opportunities here for some businesses to capitalise upon, you just need to be on the ball to spot them and take advantage.
Business sectors – gains or grains?
This will be an interesting year for many business sectors. Whilst we know that leisure and tourism is really suffering at the moment, we think there will be a big resurgence later in the year. As the vaccine roll out takes effect and our freedoms become more relaxed, and as the weather warms up, the staycation will become the holiday of choice for many. There will be lots of barriers to overseas travel with many people just not comfortable getting on a plane and heading overseas.
Those businesses who have been able to benefit from food takeaway and deliveries will have seen a huge lift in business throughout the pandemic and this will continue in the short term. However as restaurants begin to open up again, they may see this market penetration start to drop.
Others who are potentially going to see big gains this year are logistics businesses as people continue with their new found convenient online shopping. Businesses who should prepare for growth are therapists and specialists in health, fitness and wellbeing. All this lockdown food and drink has to be worked off somewhere. Sadly the one sector which we think is really going to be the loser in this whole scenario is going to be retail. Our shopping centres and high streets were already struggling before the virus took hold. Has this been the nail in the coffin or have some retailers found a niche and a way to make their shopping experience unique? Is ‘buy local’ going to be the saviour for the high street? Some of these retailers may have been able to adapt to online shopping or click and collect.
Take Back Control – A slogan that many will associate with Brexit, but we think 2021 will be all about ‘taking back control’ and not just from the Brexit slant but also from the pandemic. 2021 should be the year of taking back control of our businesses, our freedoms and our futures.
No one can see into the future to know with any certainty what is in store. We are indeed looking into a very murky crystal ball. 2021 will be the year of uncertainty so all you can do is ensure your business is resilient and agile, look after your cash flow and keep your eyes open for those potential opportunities.