Survival, resilience and growth: A report on the UK’s economic recovery

As lockdown restrictions around the UK are easing, businesses are taking steps on the road to recovery. The coronavirus (COVID-19) pandemic has impacted companies of all sectors and sizes, so the chance to revive operations and look to the future is a welcome shift for millions of small and medium-sized enterprises (SMEs).

While many businesses haven’t been able to function as normal due to the pandemic, and tough decisions have been made, that hasn’t stopped them from adapting.

From finding new markets to pivoting and offering new products and services, businesses have sought to find fresh opportunities to reach customers and keep moving.

But what does the future look like for SMEs in the UK? What challenges will they face and what steps will they take to overcome them?

These questions and more are answered in a new research report by Sage – Survival, resilience and growth: Placing small businesses at the heart of the UK’s economic recovery.

We surveyed a diverse range of decision makers at 2,000 SMEs around the UK to find out what survival, resilience, recovery and growth will look like for businesses in the coming 12 months.

Stories of resilience

In the report, business owners share their stories of resilience as their companies have adapted to the impact of coronavirus.

Jennifer Walker is the owner of the Split Screen Coffee Company. She had to mothball her business as a result of the pandemic – but things took a turn for the better.

She says: “After reading about the cancelling of all my events [in a Sage Advice article] the owner of my local zero-waste/craft beer shop kindly asked if I would like to team up and provide coffee out of their high-street premises, meaning I could operate again – effectively saving my business.”

Derrick Rowe is the owner of DPR Motorsport. While his business also had to mothball their operation and utilise government support, business planning was high up the agenda. As was looking for new opportunities.

He says: “We have formed some significant new partner business relationships as a result of the changes caused by lockdown. For example, we have significantly stepped up our involvement in virtual motorsport.”

Meanwhile, Walker has seen positivity throughout her local community.

She says: “Throughout lockdown, my village came together in a way I had never seen before. I believe it is in this new sense of community where the solution lies.”

Key takeaways from the report

We’ve summarised some of the report’s key takeaways below, notably the fact that:

• Resilience is going to be as important as growth to the recovery. Not all SMEs, only 54%, are prepared for further potential shocks or challenges, including cash flow/liquidity problems, disruptions in the supply chain, and legal and regulatory changes.
• 80% of businesses think that technology will be very or somewhat important in restarting their business.
• 33% of businesses are actively planning investment in technology.

 

The Survival, resilience and growth report covers the following topics:

• Green shoots
• The fightback begins
• A fragile recovery
• Reshaping the workforce
• Accelerating the transition to growth
• The SME sentiment index
• Recommendations for an enterprise-led recovery

Survival, resilience and growth: An excerpt from the report

Lockdown restrictions have weighed heavily on the profitability of UK SMEs – 82% of businesses reported making a profit in March, but this plummeted to 44% during April and May as companies have had to wrestle with fundamental changes to their operations and a precipitous drop in demand.

Most businesses are still experiencing issues related to the outbreak, ranging from problems adapting to restrictions (65%) to reduced demand (44%), managing cash flow problems (39%) and supply chain disruption (32%).

However, the tide is starting to turn.

June saw an improvement in profitability – with 50% of SMEs expecting to turn a profit – and this trend is likely to continue in July as more significant steps are taken towards re-opening the economy.

Looking forward, the picture improves further – but very gradually. Most SMEs believe they will be back in the black by the end of the year, and by June 2021, 75% of SMEs across all sectors predict that they will be making a profit.

Meanwhile, 32% believe they will be making a greater profit than before COVID-19 by this time next year.

Given the challenges SMEs are still facing, confidence seems high. On average, SMEs rate their confidence in their businesses’ future a six on a scale out of 10.

Businesses also generally believe they are successfully navigating the challenges thrown at them; almost eight in 10 (77%) believe they are coping with these issues well.

Meanwhile, 49% believe that the way their workforce is currently operating is sustainable for the next six months.