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Economics

The way forward

How businesses have responded to the coronavirus crisis, and what lies ahead.

We are living, and working, in exceptional times. Coronavirus may not be the first pandemic to threaten the global economy, but in 2020 the world is more connected, integrated and interdependent than it has ever been. Having to disconnect and distance has created a ‘new normal’ for how business is done.

The changes to the social landscape created by lockdown, seismic shifts in the way organisations need to function, and stresses on supply systems have placed demands on companies of every size, in every sector, which are unlikely to have featured in many business continuity plans before the outbreak of coronavirus.

“The impact of coronavirus on demand and supply across the world’s economy means that directors of retailers, suppliers, building companies, property holding companies, infrastructure funds, investment management houses and hedge funds alike will be facing challenges that many of them have never had to deal with in the past,” says Fraser Hern, group partner at global law firm Walkers.

The impact on the UK economy has been hard and fast. Figures from PwC project GDP to decline by around -5% to -10% compared with 2019, potentially worse than the 6% contraction seen during the 2008/2009 financial crisis.

Many people are worried about their jobs, and normal business activity has been severely impacted. A return to the pre-pandemic status quo is unlikely, and we must prepare to traverse a redrawn business landscape.

The resilience, determination and professionalism displayed by businesses across the country have been nothing short of inspirational. We have witnessed some extraordinary work in the face of very difficult circumstances. In uncertain times, it can be daunting to plan ahead, but where there is change, there is opportunity.

Stepping up to the plate

During the darkest days of the crisis, many companies still managed to diversify their offerings to meet the changing needs of their customers. While some sectors were better placed to thrive under lockdown conditions – food retailers over travel agents, say – even the most precariously positioned found ways to adapt. Rewiring their core business, working practices, customer interactions and competitor collaborations resulted in unexpected and inspiring success stories.

Beauty salons have been hosting virtual make-up masterclasses, and training organisations running Skype seminars. Entire industry conferences have moved online, with keynote speeches being given from living rooms. Personal trainers have connected with clients via Zoom. We have seen local pubs become takeaways, grocers and meals-on-wheels providers for the vulnerable. Artisan liquor makers have converted their stills to produce hand sanitiser; clothing boutiques have sewn masks and scrubs. And many smaller businesses have proved their ability to pivot with greater speed – and to greater effect – than organisations with far larger resources.

The world that emerges post pandemic will be different in many ways: increased use of technology, greater emphasis on health awareness and a rethink of hyper-extended global supply chains. All of these offer opportunities for businesses

Dr Sandra Bell
Risk and resilience expert

Companies have flexed working practices around social distancing and self-isolation protocols. Those with the capacity to quickly enable homeworking for office staff hit the ground running. And with people working around childcare and community responsibilities, the nine-to-five proved impractical. In any workplace where staff are required on-site – manufacturing, retail, essential financial services – the need for social distancing has also meant that tightly scheduled shifts are no longer possible. Arrival and departure times have been staggered; skeleton crews rostered; and greater automation employed to allow people to continue doing their jobs.

Innovation has been a key theme of the coronavirus response, engendering products and services that will change the way people live and work long after the pandemic abates. New shift-planning software developed to help healthcare workers manage complex daily schedules will enable businesses to ensure maximum efficiency in remote teams; the creation of ‘air corridors’ for drones to transport essential supplies has been hailed as a catalyst for drone use and development; and ‘cobots’ – collaborative robots – used to avoid breaking the two-metre rule in manufacturing plants could even allow restaurants to reopen while social-distancing measures are still in place.

Navigating the ‘new normal’

With uncertainty the only thing of which business can be certain, the best defence is scenario-based continuity planning.

“The world that emerges post pandemic will be different in many ways,” says risk and resilience expert Dr Sandra Bell. “There will be an increased use of technology, greater emphasis on health awareness and a rethink of hyper-extended global supply chains. All of these offer opportunities for small businesses. Downtime during lockdown offers a great opportunity to regroup, re-evaluate and plan for how to turn these changes into advantages.”

Flexibility should be every company’s new motto, in staffing and working practices; in the ability to hold, acquire and release stock; and in ways to funnel resource where it is most needed at any given time. Running a more agile business will require focus on sizing, eliminating waste in every function.

At some point, perhaps gradually at first, life will begin to return to a new normal. When this happens, it is important we are all well positioned to support the economic recovery of the UK.

“Build resilience through agility,” advises Darren Jukes, UK leader of industry for industrial manufacturing and services at PwC. “Introduce digital supply chain solutions for the early detection of end-to-end issues. Embed and integrate data-driven systems that provide actionable business insights. Consider reducing office space in anticipation of ongoing flexible and home working.”

Diversification was a growing trend among SMEs before the advent of coronavirus, and will be even more relevant in the wake of the crisis. The ability to transfer production techniques; offer alternative product lines; and utilise employee skill sets in innovative ways will open up new marketplaces, and create more robust business models.

Greater localisation is another likely outcome of the lockdown, influencing where people work and where they source products and services from. When the supermarket shelves emptied, local shops had supplies. Independent tradespeople came to the rescue when the big companies furloughed workers. People became more embedded in their communities through not commuting. By contrast, complex global supply chains were revealed as vulnerabilities, and consumers grew more inventive in sourcing essentials.

“The crisis will prompt greater consideration for dual and near sourcing, with a focus on localised supply chains, and potentially drawing on suppliers traditionally tied to other industry sectors,” says Jukes.

We have tentatively begun the process of turning the dial from reactive to proactive, from crisis management to planning how we might thrive in the post-coronavirus world.

“The business community needs to use the tools at its disposal to create time and space to roll through the current market turmoil,” says Fraser Hern. “Now is the time to focus on getting to the new normal in as robust a state as possible.”

This material is published by NatWest Group plc (“NatWest Group”), for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed to be reliable, it has not been independently verified by NatWest Group and NatWest Group makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of the NatWest Group Economics Department, as of this date and are subject to change without notice.

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