The impact of Covid-19 on UK businesses and the economy is gaining greater attention as the daily numbers of reported deaths declines and the public is increasingly open to Government plans for a full exit out of lockdown.
For businesses that aren’t essential but whose workers cannot work from home, Government guidelines this week invited them to begin to reopen. For most businesses experiencing significant losses while being forced to closed, this was likely a welcome announcement.
We featured last week the impact Covid-19 is having on university teaching budgets, job losses, predicted cuts to research and innovation budgets and at its worst, forced mergers or closure.
This week we comment on the latest survey results from the UK Parliament research body POST which reported survey results from 1100 experts about the impact Covid-19 will have on business and trade in the short, medium and longer term.
What is most concerning is experts’ prediction that local and SME businesses are most at risk due to changes in consumer behaviour and that this will lead to job losses, bankruptcy and eventually business closures. Initial results revealed concerns about supply chains and logistics, business support and at-risk industries, industry behavior and entrepreneurship.
Which industries are most at-risk?
Experts have identified several at-risk industries that may be significantly affected by the economic downturn:
- Manufacturing – Experts are concerned that ongoing closures of manufacturing firms may affect business supply-chains in future.
- Arts and culture – With many theatres, museums and other cultural venues facing medium to long term closure, it is unknown whether many of these venues will be able to recover pre-Covid financial levels. Job losses for many who are employed as freelancers in this industry will also be significant.
- Travel and hospitality – Industries unsurprisingly are at high-risk with less people travelling. This will eventually lead to large-scale job losses.
- Traditional retail outlets are predicted to suffer with more demand for online purchasing and regulated social distance measures in place. This will have a trickle-down effect on landlords.
- Agriculture and horticulture – Over 100 experts raised concerns over the impact of a downturn on global supply chains in food and healthcare due to the dependencies of this industry on events in other countries. The logistics of food supply chains are especially vulnerable because of set dates when food can spoil and this in turn could lead to shortages or stockpiling from consumers.
Many of these predictions are backed up by research highlighted in last week’s blog post reporting findings in the ONS research study to assess the impact of Covid-19 on business so far. There, manufacturing and arts, recreation and leisure were seen to be experiencing the hardest impact.
What support is needed for businesses to survive?
Science Minister Amanda Solloway’s quick assembling of the Research Sustainability taskforce this week, just one week after her announcement of intention to create one, and Chancellor Sunak’s extension for further furlough support for businesses, are both indications that support for businesses is the Government’s top priority.
What this support might look like is still to be determined. One helpful suggestion from the experts surveyed by POST was the need for greater support for entrepreneurship. Experts suggested more financial support for R&D to help bring new products created over this period to market and to underpin those businesses whose research budgets may be the first to take a hit.
We don’t need to mention this Government’s commitment to research and innovation as a solution out of this crisis. £100 million in Quality-Related (QR) research funding was announced last week as part of a universities’ bailout package to be brought forward to underpin the research base and plug any immediate fall in funds available.
For small and medium sized R&D intensive firms, Innovate UK also announced up to £200 million accelerated grant and loan payments for its existing partners alongside additional grants of up to £175,000 for firms not currently receiving Innovate UK funding.
As a further demonstration of its commitment to supporting R&D, Innovate UK is offering a £20 million competition for businesses, providing grants of up to £50,000 to develop new technologies and new ways of working during the pandemic that could help boost the UK’s resilience.
There will, undoubtedly be more data and analysis that emerges over the coming months that will underpin our understanding of the impact that this unprecedented crisis is having. We are looking forward to the KEF results due to be announced in December 2020 and our annual NCUB university/business State of the Relationship report which will now be published in October to offer further longer term analysis of Covid-19 impact.
Unpredictably however, given the public’s focus on the short term crisis, the response to the Innovate UK initial fast-start competition mentioned above has been impressive with over 8,500 submissions. It shows that despite financial difficulties, business’ resilience for continued R&D continues and that they recognise the importance of innovation to progressing away from recession.
As we begin to understand more about the immediate and longer term impact, it is absolutely vital that proposed solutions are targeted, flexible and scaled if successful and Government financial support forms a principal part of the solutions being proposed.