Panning for gold in difficult waters: We search for hope in the Business West economic survey

Written by: Andrew Merrell | Posted 17 August 2020 10:03

Panning for gold in difficult waters: We search for hope in the Business West economic survey

It is rather like panning for gold trying to pick positives from the biggest survey of its kind into how businesses in the region have been affected by the pandemic. 

Just nine per cent of firms describe the impact as positive or extremely positive, according to the Business West Coronavirus Impact Survey Reportwhich means you don’t have to be a mathematician to work out the current is against you. 

With such stark percentages it would be easy, but unnecessary, to slide towards drama. So to give it to you straight, 76 per centstated their experience of the pandemic had been ‘negative’ or ‘extremely negative’. 

But, we did find some positives. The Coronavirus Job Retention Scheme (CJRS) was described as “essential for 41 per cent of businesses out of the 519 who responded to the survey. 

According to Business West this was the most-used used government intervention before tax deferrals and bounce back loans, with 66 per cent describing it as either useful, important or essential. 

Some 38 per cent of businesses used CJRS to furlough three quarters or more of their staff, 35 per cent of employers didn’t use the scheme at all. 

The problem with trying to celebrate these finds is this – the watersare still fast-moving and businesses are now especially concerned for what lies ahead. 

Whether you see sixty-five per cent of firms expecting redundancies to effect less than a quarter of their furloughed staff and that 68 per cent of respondents do not expect to make any of their furloughed staff redundant as positive or negative in the current climate is a tough one.

Phil Smith, managing director at Business West, which represents the region’s chambers of trade,  called for a new buoyancy aid tobe thrown to businesses to give vital confidence and stop too many more going under.

Fresh support is required to restore business confidence and return businesses to growth, attesting the decline of recent months,” said Mr Smith. 

“The wider speed at which the economy and individual business income recovers will also be critical to levels of unemployment and underemployment moving forward. 

Our survey suggests that, other than the devastating personal impact of redundancy, some of the actions taken by businesses will be short term with no longer lasting implications for workers in the region. 

However, salary cuts, and a move to more use of part-time and home-based working based suggest a longer-term trend. 

Household purchasing power and confidence has suffered more of a decline than just the jump in the claimant count suggests, significantly hampering the chances of a consumer-led recovery in our region.  

“One upside of coronavirus is the potential long-term benefits of homeworking and other behavioural changes on air quality in our region, however, the implications for commercial office space remain unclear.” 

So, there is no happy ending in sight yet. In fact, the predictions are miserable. 

Business West is not alone in predicting job losses to “accelerate” until November. 

In keeping with our earlier commitment to search for the positives, the best we can do is to say that 17 per cent of respondents took on additionalstaff since lockdown. 

But then we become overwhelmed by the general direction of flow again. 

Twenty per cent of employers indicated that they were as yetunsure of their redundancy plans, with e survey said 27 per cent has already made difficult decisions in relation to their staff. 

Nearly half (43 per cent) have already made those posts redundant and a further 43 per cent said they would be making redundancies between August and October 2020  

The survey suggested nearly 90 per cent of all redundancies will occur before November this year – a significant concentration of impact in a short space of time.  

Employers said they had already taken extensive steps to reduce labour costs, with 49 per cent cutting paid working hours. 

Many had also encouraged or planned to encourage employees to take unpaid leave (23 per cent) or reduce employee salaries (32 per cent).  

These statistics show that labour cost reductions go far beyond reported job losses, with take home salaries of workers in our region adversely impacted – a contraction in demand for goods and services is highly likely.  

Unsurprisingly 44 per cent of businesses have current concerns about their financial position, rising to 75 per cent in the future. 

Whilst business sentiment remainsvery negative, these figures are moderately less gloomy than the 62 per cent and 88 per cent when we asked this same question four months ago.  

The most dramatic impacts, predictably, were on profitability where 61 per cent of respondents reported a decrease. Fifty per cent of respondents reported a decrease in cash reserves. Liabilities including loans had increased for 28 per cent of respondents.  

A majority of respondents (24 per cent) anticipate the recovery taking over 12 months. A worrying 15 per cent of respondents donot anticipate ever recovering to their pre-pandemic level, and the most distressed businesses surveyed (eight per cent of all responses) are concerned about their ability to survive. 

Most businesses anticipate a return to pre-pandemic levels of activity next summer.