The Outlook for UK Business, What Next? and the Importance of Controlling the Controllable.

Only this week Morgan Stanley reiterated their confidence in a V-Shaped Recovery as global economies ease their way out of lockdown, however, their update arrives at the point when we are hearing of stark contractions in UK GDP and a reinvigoration of The Bank of Englands’s Quantitative Easing program.

Macro information will for some time yet provide confusion and contradict, the interpretation of Big Data and understanding the impact at a micro level is as ever far from clear. However, what is apparent is that business has developed a new operating rhythm and there is cautious optimism from what we can feel and touch. The roads are busier, more shops are open(ing) and schools are engaging in a conversation of what the future might look like.

Whilst by default rather than by design there are a number of key truths that have appeared throughout this crisis:

• Business owners are closer to their businesses coming out of this crisis than going in,
• A general pause in activity has allowed for a conscious or subconscious review of activity, operations and strategy, life will be different on the other side.
• Strong, well-invested businesses with good leadership, and crucially those with flexibility in liquidity, will be best placed to capitalise on opportunities as they arise.

Whilst sentiment is encouraging, there exists substantial unpredictability as to how we will navigate the exit of this crisis given the number of variables there are to play through.  The simple truth is that whilst central Government support has largely sheltered the cash impact of the crisis these measures are a combination of temporary arrangements and deferral of a problem.  Whilst far from an exhaustive list the below provides context as to the immediate and medium-term challenges ahead:

• Potential for a second wave of the Coronavirus and subsequent further lockdown,
• The phased unwinding of Furlough support,
• The commencement of repayment of HMRC schemes organised throughout the crisis,
• Working capital cycles different from what we have known as customers and suppliers seek to protect their own positions,
• Apparent finite life of BBILS and CBILS facilities with unclear supply after,
• Repayments commencing on hastily arranged Capital Repayment Holidays and, in the medium term, commencement of BBILS and CBILS facilities.

Whilst market outlook is uncertain it is apparent that owners will need to remain hands on with a clear prioritisation of cash management, with a level of control likely not evident prior to the crisis. Business models will need to evolve.

Stakeholder management will be key to success whether staff, customers or suppliers. Engagement with funders will be a fundamental part of this process and ensuring that the funder is fully aware of the challenges and outlook as well as alignment of strategy should be a core part of this process.

For better or worse, the one thing we can be certain of is that the reality will deviate from the expectation in both the short and medium term. The challenge as ever in these scenarios is to be suitably informed and aware of the situation as well as have a clear understanding of the options available. As part of our ongoing business support strategy at Pierce we are delighted to support clients through these uncharted times, through a combination of:

• Building and analysing the short and medium term cash outlook,
• Leading and supporting interactions with funders and ensuring all avenues are suitably explored,
• Building appropriate contingencies and sensitivities to ensure when matters do deviate there is flexibility in the plan.
• Providing independent critique and challenge and ensuring that short and medium term requirements are balanced.

Whilst there are a myriad of statistics relating to the relative success or otherwise from the various funders out there. There is quite simply a linear function between the quality of solution provided and the quality of the interactions and supporting packs provided to the funder.

As part of any stakeholder process early engagement with funders, with a no surprises approach, and a clear articulation of the requirement and proposal as well as a controlled cash position will ensure the best chance of success in achieving the best solution for your business.