UK business has found itself at a tumultuous crossroads, with the impact of a worldwide pandemic hitting hard while Brexit negotiations are still very much unresolved.
2021 looks set to be another difficult year, with the effects of a Brexit deal or no-deal still not fully understood, and the COVID-19 public health crisis far from over. But while political fallout, market crashes and new lockdowns are difficult to predict with any degree of accuracy, there are other challenges that UK businesses can start planning for today.
In fact, with the right business planning, investment and contingency plans, businesses that tackle 2021 head-on are likely to come out the other side stronger when the recession finally eases up.
In this article, we ask our financial planning experts at Irwin Insolvency what challenges UK business will face throughout 2021.
UK Economy Has Shrunk by 9.7 Per Cent
The worldwide pandemic had an immediate effect on the UK’s economy, but it was the first lockdown in March 2020 that really set the economy into free fall. With businesses closing and workers on furlough, the economy shrank rapidly, spiralling into the first recession in over a decade and the worst recession in centuries.
As lockdown eased, the economy began to rebuild, but secondary and regional lockdowns have seen the economy struggle repeatedly through the year. The BBC estimates that the UK’s economy has now shrunk by up to 9.7 per cent, a figure that’s likely to increase in 2021. While the UK is badly hit, the rest of the world is struggling too, with the BBC also estimating that the worldwide economy has shrunk by 4.4 per cent since the global pandemic began.
For businesses, a shrinking domestic and global economy isn’t good. Customers will have less disposable income, while clients will be looking to cut down on overheads and expenses. For employees, the threat of job loss is very real and unemployment looks set to rise.
Less Government Support Available
While the recession was hard-hitting, there’s been more government support available for UK business than at any other time in recent history. Struggling businesses have been able to furlough workers, take out low interest Bounce Back Loans, and make the most of many other financial support tools throughout the COVID-19 crisis.
However, while many of these schemes are extended into the New Year, the government can’t afford to keep these going indefinitely. At some point in 2021, UK businesses will be on their own again.
For business owners relying on government finance to help them through the crisis, this winding down of state-backed support is a challenge they need to overcome to get back on track in the future.
Increased Online Competition
The real winners from the COVID-19 pandemic have been online businesses like Amazon and Zoom that have provided valuable services through lockdown and increased their market shares and value massively.
For traditional businesses with a physical presence or reliance on walk-in customers, this online threat will be the biggest challenge through 2021. Many customers have made the move online too, and it’s going to be difficult to drag them away from this convenience.
To compete, businesses need to invest in software and hardware to move online. Restaurants need apps and delivery networks, high street retailers need slick websites, and businesses need the technology to work remotely.
Brexit couldn’t have come at a worse time for businesses. During the crucial end-game negotiations between the UK and Europe, the world has been focused on the threat of COVID-19.
Brexit will affect businesses in many different ways, but it’s guaranteed to throw up challenges across the country. Imports and exports to Europe will become more difficult and expensive, employees will require business visas to work on the continent, and the economy will undoubtedly fall into a deeper recession as a result of a no-trade-deal outcome. Even a thin deal will hit many businesses hard.
Looming over all of these challenges is the continued and ongoing threat of COVID-19. The public health crisis is far from over unfortunately, and as the virus continues to cause havoc to the economy and to people’s health, there’s always the threat of future lockdowns across the country (both national and regional).
Business owners need to keep planning for lockdowns in the foreseeable future, and have contingency plans in place to continue operating with restrictions or to shut down cost-effectively if this becomes necessary.
There Are Opportunities to Take Too!
But it’s not all doom and gloom for British business. While the economy is shrinking, there are still opportunities waiting to be seized.
Rather than planning for things to go back the way they were, business leaders need to plan for the ‘new normal’. Overcoming these challenges is going to open up huge opportunities for businesses.
While high streets are shutting down, business can look to the digital world, where they have the chance to connect with and sell products and services to many millions more customers than they ever had before.
Different products and services are in higher demand now than before COVID-19, and businesses have the opportunity to pivot into new markets. Those that move with the times by switching to remote working and providing employees with flexibility will find that their company can recruit the best talent across the country, while increased competition in the workforce and the economy as a whole will cause greater competition but potentially lower overheads.
Contact Irwin Insolvency Today for Your Free Consultation
With ever-changing rules and regulations governing a faltering economy in the midst of the pandemic, these aren’t the best times to try and go it alone. With years of experience in the insolvency sector, Irwin Insolvency can provide the expert advice and analysis that your business needs to survive these trying times. Our insolvency practitioners are up to date on the latest news and advice and are ready to help you. Contact Irwin Insolvency today for your free consultation.