Think Tank

Continuing on the road to recovery

As businesses prepare to navigate through the next phase of the coronavirus pandemic Old Mill’s Head of Owner Managed Businesses, Jolyon Stonehouse ponders on some of the risks they will continue to face – but also considers the opportunities.

Earlier this year I made the point that when faced with a sudden crisis like COVID-19, businesses typically go through three phases:

Phase one: risk assessment and information gathering

With things changing fast, trying to understand where you find yourself, what the implications are and gleaning what information is available on government support.

Phase two: protective action

Having understood the situation and estimated the impacts, taking decisive steps to protect the business, including accessing all government support including funding.

Phase three: looking to the future

Fires have been fought, funding and government support arranged, and the business has adapted to lockdown. The owner begins to plan for the resumption of business post lockdown.

23rd October 2020

At the time the article went to press in mid-May there was anticipation that we were turning a corner. I also made the distinction that, as we emerged out of lockdown, we would be looking at a resumption of business but not a return to normal and this is what has sadly transpired as the country now braces itself for a tough winter ahead.

So, with analysts forecasting that the UK’s recovery now looks set to stall with the latest GDP figure much weaker than expected, combined with the introduction of a more localised three-tiered lockdown system, how do I see things developing in terms of opportunities and what should owner managers be keeping an eye on?

Firstly, business owners are, on the whole, a resilient bunch who have already adapted pretty well to the changes brought about by this pandemic in trying to work out the repercussions for their businesses. It was fairly self-evident that the recovery would be unevenly distributed with some sectors seeing a rapid bounce in activity whilst others were facing the prospect of a long climb back.

With talk of business failures and widespread redundancies it’s easy to get caught up in the negative headlines coming out of the media. Whilst it is a mixed picture with some sectors really struggling, there are also success stories out there, particularly where businesses have been able to change or adapt the core elements of what they do to the new circumstances we find ourselves in. For instance, one of our clients, H-WASH, a supplier to the retail and exhibition sectors was able to pivot relatively quickly and now makes hand-washing stations using the same skills and staff.

The reality is that we have to deal with what’s in front of us and my experience is that people are innovating whilst also being incredibly sensible about future planning.

Many have taken a really hard look at their businesses in a way that perhaps they hadn’t done so before (because they hadn’t needed to) and this has led them to improved business performance as COVID-19 has forced them to work hard on rethinking many of the key elements.

So, change also presents many opportunities not just risks. New products and services, new routes to market and new collaborations between businesses will all follow from this pandemic with some businesses emerging leaner, fitter and in better shape.

Leveraging government support

Over the last six months we’ve seen various iterations of government support measures for both businesses and employees designed to assist firms with cash flow and avoid the so-called cliff-edge scenario where employers would be forced into making widescale redundancies as a result of lockdown.

The latest package of government support aims to assist those businesses and employees that will legally be forced to close as a result of localised lockdown restrictions. This will potentially create a real conundrum for employers in that, in reality the new Job Support Scheme is shifting a lot of the cost of support directly onto business.

Whilst it’s a real tragedy that, as a consequence of this latest surge in infections, some jobs will inevitably disappear, at the same time it’s also true that there are many businesses across the region that are thriving and continue to trade fully with their workforces still in full-time employment.

Keeping an eye on your cash flow

As part of his Winter Economic Plan, the Chancellor also announced that loan deadlines have been extended to the end of November and with more lenders now on board than at the outset this presents a window for businesses to consider whether, as a result of the ongoing situation, they will need additional help to assist with cash flow requirements going into 2021.

There are a number of things worth considering in order to maximise cash flow:

  • I am seeing some businesses paying off loans and debt when it may be best to hang onto cash and see how 2021 plays out
  • It may be worth getting your accounts in early and getting any losses turned into cash via a Corporation Tax repayment
  • Whilst businesses were able to defer their VAT payment for the quarter ending in June to help with cash flow, this comes back into charge on 31 March 2021 and there’s a concern that a large number of businesses won’t have that cash available potentially leading to more insolvencies next spring. Businesses will have the option to spread payment to help soften the impact of this problem and it may be prudent to consider putting in place a ‘buffer’ whilst government loans are still available
  • Additional measures have also been introduced giving businesses the option of spreading loan payments over a longer term which will serve to reduce the amount of cash going out each month
  • You need to be aware of your working capital commitments in that there are inherent dangers for some businesses who may have enjoyed a working capital ‘honeymoon’ during the first period of lockdown.

Facing the winter elements

In many ways planning for your 2021 cash flows is like taking a hat, coat and umbrella outside to deal with the winter weather – and we are faced with an economic winter in every sense.

So think of it a bit like having a selection of umbrellas; handy to see you through the rain with cash flow planning, a further business process and efficiency review, getting losses turned into cash, and (if the pandemic is driving innovation in your business) not forgetting maximising R&D tax credits.

We will get to the sunshine again but it’s essential not to die of exposure before we get there. Tough as it is we need to keep our businesses lean to survive and that places us with a dilemma around keeping staff using the government support schemes if we possibly can but not burdening the business with unsustainable costs.

For further information contact Jolyon Stonehouse, Head of Owner Managed Businesses at

Old Mill – 01749 335016