The Coronavirus crunch? Thoughts....
Graham gives some thoughts on the current economic and medical emergency, in an article to be published in the Journal later this week.
Despite the signals and constant media speculation, Monday’s announcement of the suppression phase of the coronavirus was still a shock. That it is necessary is hardly in doubt; if we don’t congregate together a virus cannot spread. However, we need to work to earn money to pay for our way in life. Remodelling our entire economy in a matter of weeks is a big task. I am not a doctor, but I am in business and I have led a business organisation in this region. So I’ll reserve my comment for things I understand and leave the epidemiologists and public health officials to deal with measures against the virus.
The first thing I know is that the North East’s business community is resourceful, innovative and determined. We know that it falls to us to provide the incomes of hundreds of thousands of people and the taxes for the public services to function. We understand our responsibilities and know that keeping our businesses financially secure is the right thing to do for every stakeholder, both within businesses and in the wider community.
The government’s budget was a good start, and this week’s massive boost will enable business owners to keep cash flowing into their firms. Grants and tax reliefs do not affect all firms, my own small business gets no rate relief, and I will need to spend the cash in the bank to get us through to the end of April with reduction of employment costs. But like all businesses I could apply for a government-backed support loan later. I’m also the North’s representative on the Institute of Directors National Council, as such I have asked that an idea be submitted to the government as part of the urgent employment consultation the Chancellor announced into supporting employment.
I would like to see a policy similar to the German temporary reduced working scheme. The terms might be that the government will pay a specified quite high percentage of the wage bill for companies that were profitable up to the end of January, but face wages pressure in April. This would be a grant, available for a limited period related to the progress of the virus. It would be conditional on the businesses not taking on any extra employees during that period, and not making anyone redundant. Its just one idea, but it has won support from businesses in Germany.
The challenge for all businesses is to ‘war game’ this scenario accurately. Any general will tell you, you can’t fight today’s battles on a plan made for the last war. Generals also say no battle plan survives the first contact with the enemy. Ministers need to be innovative and agile, I liked the Chancellor’s remark that he was not being guided by ‘orthodoxy or dogma’ and I have confidence in him.
My firm has clients in many different sectors. My friends operate businesses all over the North. The phones calls and texts have been constant, I haven’t spent spent an evening at home this week without a call from a mate wanting to exchange ideas. The common theme is a desire to shore up cash to take them through what they hope is a relatively short period. Many worry that their clients will slow down payments, either deliberately or by the simple reason that accounting staff are not in their offices and the process takes longer. Next they worry about their liabilities, wages being the first concern. But nobody I have spoken to wants to make anybody redundant. Everybody wants to keep their people in place. Solutions tend to start with discussion about mandating holidays in the so-called ‘lockdown’ (thankfully it isn’t a formal ‘lockdown’ yet), then moving to short time working, then on to the potential for layoffs.
In my own firm, which by the virtue of being smaller at fewer than 20 staff, we have had an open discussion. Our plan starts with my own pay being temporarily stopped, then moves on to holidays being shuffled around, and then, in mid-April, everybody will be told the state of cash flow and we might discuss the possibility of shorter working hours. Other business have accelerated that process, though these have tended to be newer firms and I have noticed younger directors taking much quicker, harder decisions. In my view they need to let a week or so pass to let the landscape become clearer.
This week we were advised to work from home if it is possible, many firms cannot do this, the huge cohort of North East manufacturers for example. Even my own firm requires a small core team to operate equipment at our office, where we have web TV and podcasting studios that we want to use to promote our clients using new media techniques. I have hosted LinkedIn videos with Northern businesses, which have been widely viewed. Of course, many of my staff will work from home and if all office working is stopped we will comply.
My Monday staff meeting was a Covid19 SWOT analysis, and it came up with innovative ways of supporting clients and co-operating with other firms. I am not alone in looking for opportunities to use void time, one firm, CMS in Gateshead, maintains buildings, such as hotels, for big companies around the country. It has found itself inundated with enquiries as unexpectedly empty facilities can now have routine maintenance brought forward and undertaken without inconvenience to the customers and users.
There is nothing good about the Coronavirus outbreak, and those of us who run businesses need to deal with it in a measured, calm, way. If we do, we can come through with our workforce and prospects intact. We need to maintain our commercial relationships, pay our bills, involve our staff in the tough choices that a downturn presents, pressure the banks and the government to maintain cash flow and liquidity, and use this unprecedented event to innovate.
I hope the medics beat Covid19 and that the action taken to change