‘Coronavirus could have meant curtains for us, but we’re stronger than ever’: Small firms survived lockdown, but what happens after furlough?
Could small businesses be heading out of the frying pan and into the fire? While many small and medium enterprises are no doubt relieved to have made it through national lockdown, they now face a set of new challenges.
Government support schemes such as furlough, grants and business interruption loans are all winding down – just as businesses are coming to terms with tighter business margins, staff redundancies, long-term changes in the way people shop, the cost of being Covid-secure – and sudden local lockdowns.
And to add to the mix, there is uncertainty over Brexit. Many businesses feel they must dig deep to ensure they survive.
Tej Parikh, chief economist at the Institute of Directors, says it is a ‘crucial’ time for small firms. He says: ‘We’re moving away from a period when businesses needed bridging support during lockdown. They now require assistance with cash flow difficulties.
Setting new goals : Bird and Blend’s Krisi Smith and Mike Turner outside their shop
HOW TEA FIRM TURNED OVER A NEW LEAF
Having to close temporarily all eight stores due to lockdown could have meant curtains for specialist tea retailer Bird and Blend. But managing director Mike Turner says his company is now stronger than ever
He and co-founder Krisi Smith, both 32, are about to embark on an aggressive business expansion plan. It will result in three new stores being opened next month, the launch of a new tea – spiced pumpkin pie – and bringing forward the sale of its popular ‘Tea Advent’ calendar
Turner says: ‘We set up Bird and Blend seven years ago to combine our knowledge of working in the tea and hospitality industries.
‘We wanted to make the business not just about the product, but the whole experience of smelling, tasting and talking about tea.’
With sales in stores and festivals out of the question, Bird and Blend furloughed two-thirds of its staff and moved everything online. Website sales doubled thanks to advertising which added many new customers to its fan base.
Now Bird and Blend has reopened its stores, is recruiting more staff and making the most of cheaper rents to expand. Turner adds: ‘One of our new shops is on Portobello Road in London’s Notting Hill which we would never have been able to afford normally.’
While the sampling and smelling of teas remains off-limits thanks to Covid-19, staff are still making customers feel welcome. Turner says: ‘By being happy, chatty and smiling, you can still give someone a hug from ten metres away.’
‘Many Government support schemes are being lifted but consumer demand isn’t back to previous levels. As a result, there’s great uncertainty over making key decisions such as launching new products or committing to new investment.’
End of furlough and rent protection
With the furlough scheme ending next month, businesses must make tough decisions about whether to keep employees on or let them go. Simultaneously, they are having to get to grips with the introduction of the ‘Kickstart’ scheme that encourages them to employ 16 to 24-year-olds – with the costs met by taxpayers.
Andrew Goodacre, chief executive of the British Retailers Association, says: ‘The Kickstart scheme will be a challenge for retailers as it is only for new jobs – redundancies are more likely. Mean – while, the £1,000 bonus in January next year for keeping staff on after furlough ends is not attractive enough as many retailers will have to deal with stark realities.’
Fears over the cost of local lockdowns have been allayed slightly with the Government promising up to £1,500 of sup – port for every three weeks an outlet is forced to close, but many say more is needed.
One of Goodacre’s main concerns is the rent moratorium being lifted at the end of this month, meaning businesses can be kicked out of their premises if they are unable to pay their rent.
He says: ‘Around 20 per cent of independent retailers could not pay their rent in the second quarter of this year. I expect the same number, if not more, to struggle when their third quarter rent is payable.
‘While the larger supermarket chains and online shops have been doing well, retail footfall is still down around 20 to 30 per cent, which is really difficult for smaller shops. Without support, many will be forced to close.’
Pivot your business…and be positive
A note of optimism is sounded by Emma Jones, founder of small business net – work Enterprise Nation.
She says: ‘A lot of businesses have come out of lockdown stronger than when they went in. Businesses have gone through so much uncertainty in recent years – for example, the General Election, Brexit and coronavirus. Many feel that if they have survived all these events, they can survive anything.’
The secret for many businesses, she says, is not to rest on their laurels. She adds: ‘Those which are doing well are those that have pivoted. They have moved online or launched new products, adapting quickly to where, how and what customers are buying.’
Research by Enterprise Nation shows that businesses which seek advice swiftly are also doing better than those that bury their head in the sand. For example, on Brexit, she says it is essential that businesses with a focus on exports get advice not only from their accountants, the Government and Customs and Excise, but also from companies in the same boat.
While a deep recession is still a threat, a start-up boom is underway with a record number of new companies being formed. Jones says: ‘Businesses which launch in a recession tend to survive longer because they budget for low costs and think they have spotted a gap in the market.’
Many groups are calling on the Government to help further. Schemes being mooted include Brexit ‘vouchers’ to spend on seeking Brexit advice, more support for retailers and tax breaks to incentivise investment. Enterprise Nation has developed free online courses covering everything from web design to embracing TikTok.