Time to keep a cool head, not cooling appetite

GDP figures released for April 2020 show that the economy plunged a record 20.4% in the month of April, following a 5.8% drop in March.  

The decline in April was driven by a 19% decline in sectors such as aviation, hospitality and tourism.

With it, stock markets that are correcting and threatening to test the lows of March, with the S&P500 skirting with the 3,000 level – a key psychological level for markets.

The economy is gearing up for the worst UK recession on record.  Undoubtedly there are tough times ahead – for jobs, debt and insolvencies. But there is hope. 

For investors, business owners and directors, now is the time to be keeping a cool head; not embracing knee-jerk reactions.

Economies bounce back

Firstly, after every major decline in GDP, the following years have registered sharp increases.  There have been more years of year-on-year growth than there have been declines into negative territory and technical depressions.

History teaches us that economies bounce back, and in turn so do the markets.  We all knew these sharp declines were coming, so it should not come as a surprise.  The markets did, but despite this demonstrated stratospheric growth since the lows of March.

We also know, and should remember, that this is an artificial depression.  

The Great Depression was caused by margin trading, and falling as it did between two World Wars.  The financial crash by levels of debt that were growing, irresponsible and unchecked.  

But the drivers for this crisis are unprecedented – economies in lock down to prevent the spread of a virus.  In turn, there has been unprecedented levels of support from governments in terms of both monetary and fiscal stimulus.

Exiting lockdown

Exiting lockdown was always going to be harder than on the way in, and there are tough times ahead as the stimulus packages fall away and unemployment rises.  

But now is the time to look to what can be done about it.  

Now more than ever, business owners and directors need to keep a cool head.  Now more than ever they need to be reviewing business plans, forecasts and financing.  

Brand pivoting

‘Brand pivoting’ has become the business buzz phrase of Covid 19.  

• Small independent outlets are embracing online retail for the first time.  
• Established e-commerce traders are engaging with over 30 online platforms to deliver international expansion.  
• Distributors and manufacturers are repurposing their capability to service new markets and deliver new products.  

If we talk about the ‘new normal’ then that needs to include businesses planning like they have never planned before (and as a Bishop Fleming survey has demonstrated – too few business had a business plan prior to Covid 19, and desperately need to play catch-up). 

It needs to include blue sky thinking – i.e. brand pivoting.  

Businesses can help employment by realising that not everyone needs to work in an office setting – lockdown has demonstrated that, which means business can tap into a much wider pool of talent – i.e. across a wider geographic area.  

Embrace the support

SME businesses represent 99% of the business population, and drive employment and the majority of our tax take.  They thus have a responsibility to do everything they can to plan for the future, and embrace the support that is out there:-

• 38 Growth Hubs across the UK, 
• 9 regional Department for International Trade operating units
• Countless Chambers of Commerce.

And let’s not forget the accountant in all this.  A good accountant can not only help you plan, but marshal and signpost external support, from banks to lawyers, Growth hubs to grants, DIT to Innovate UK.

Now is the time for business owners to plan, look for support; and control what is within their gift to control.  Now is the time to keep a cool head, and an appetite for business.

Reach out to Bishop Fleming and we can help in a number of ways:

• Strategic planning
• Financing and restructuring
• Raising investment
• Accessing tax incentives such as R&D tax credits, Patent Box, EIS etc
• Covid 19 Government Support
• Embracing and expanding international trade supported by our International Team
• Support with business acquisitions