The immediate emergency economic responses made after the Covid-19 lockdown were necessary if, for no other reason, than to calm the nerves of business owners and the markets.
The enormity of the situation facing not only the UK but the global economy was clear – now there has been some time for reflection the immediate emergency response needs refinement, and inevitably the needs of different companies will vary enormously. It is also obvious that some businesses will not survive – and in further response there is a need for prioritisation.
Effective business engagement can play a hugely valuable role in helping to build resilience in the economy. The planning for this work needs to start now and, and to be truly effective it needs to be integrated with an economic development strategy – in too many cases, however, it offers little more than ‘tea and sympathy’.
Running around, hair on fire, with a cheque book trying to help everyone is not an option, and a business engagement response that only involves frantically repeating the interventions laid out in government business support schemes is not really adding value. Any organisation successfully operating in 2020 can access and understand online information, especially
when their business survival depends on it.
There are two depressing realities that have quickly become apparent. The first is that any business that did not have three weeks free cashflow to survive the initial lockdown had limited resilience in the first place – accepting that no business would expect to lose 100% of weekly turnover overnight. The second is that micro-businesses or sole traders operating with very low levels of capital probably now face tremendous personal hardship but they, or somebody else, can resume their activity when the economy re-starts with very low levels of investment.
The four stages of business impact
It is possible to consider this crisis in stages and to begin to work through which sectors will be affected and during which stage – remembering that even in this environment there will be both winners and losers. The four stages are:
1. Immediate impact – it has been clear to everyone that hospitality, leisure and tourism has stopped overnight but there will be other immediate losers too, personal services and many retailers.
2. Supply chain impact – as the economy re-opens there is likely to be a stuttering start. The experience of Austria, Italy, Spain and others suggests that different sectors will re-start at different times. In the re-opening phase manufacturers and construction firms are likely to struggle to gain the supply of some business critical materials and this will cause further dislocation to markets.
3. Pipeline impact – the services industry, critical to the UK economy, is likely to have a difficult summer and autumn. Those who see out the crisis by working through their existing client order book then face a tough summer/autumn having had little opportunity to refill their pipeline during lockdown.
4. Recessionary impacts – it is likely, at least for the short-term, that cashflow and confidence concerns in both consumer and business sectors will reduce expenditure and continue to cause economic damage. If this is matched by fiscal tightening by a government seeking to reduce borrowing too quickly the position will be worsened.
The conclusion that can be drawn is that recessionary pressures will be in place for some time – and sadly some of the immediate business support measures, established with the best of intent, will simply have provided funding to firms unlikely to survive further, thus worsening the financial position of the government. Targeting support may be more time-consuming, but any further measures will need to back specific priorities rather than provide blanket support.
Clarifying economic priorities in response
The priorities for any given geographical area will differ – but at this point there is a need for economic development professionals to have absolute clarity on the sectors that provide the greatest value to their local economies. There is then a need for an understanding of which of these sectors are likely to need support and when.
There is a strong argument that any interventions also target those businesses which were hitherto profitable and have significant capital investment. It is that replacement of capital that will be the most difficult to achieve post-crisis, and just a truism that businesses requiring less start-up capital can bounce back (or be replaced) more rapidly. Capital-intensive businesses lost now may be lost forever.
In any analysis, however, some consideration also needs to be given to future trends. Covid-19 may yet cause a chain of events where the economy is never the same again – but more likely, when the economy has settled down, the crisis will have accelerated trends in the economy that were already apparent.
Online shopping, digital access of public services including healthcare, working from home, medical testing and diagnostics, and reduced expenditure in pubs are not new phenomena – but they are likely to be the ‘new normal’.
However, as is always the case in economic development, analysing events and drawing conclusions is the easiest aspect of the conundrum – the challenge is what to do next.
Action planning to support engagement
The immediate period is perhaps a moment for calm reflection, difficult though this may seem. Right now businesses are focused on preserving money – and any business engagement in the short-term is likely to focus on faster access to cash. Assuming this cannot be offered in most areas of the UK, any conversation is likely to be short and terse. There is, however, a rare opportunity to plan. There are many aspects that could be evaluated in the next few weeks but it would seem sensible to re-visit any or all of:
Who are those businesses in the sectors generating the largest value in the local economy and who is in their supply chain?
Is it likely that a sector group could add value in the long run? Could this provide supply opportunities for new local businesses? Do these businesses have a skill requirement that needs addressing? What are the future likely land and property requirements for the sector? Are there legislative changes ahead and how can these be addressed? How will tariffs and cross-border access arrangements affect the sector after Brexit? Are their alternative market sectors into which their goods and services could be re-purposed?
What opportunities are there for our towns and cities to re-engage with their customer base and reach new customers post-crisis? Is there an opportunity to reach a new audience or create a new narrative about the activities of the town or city?
Are there projects/initiatives that were being established by Higher Education, Further Education and other institutions that need to have a clearer proposition – or better define a local cohort of potentially interested businesses? Can that proposition be shaped in the coming weeks? Can the potential business audience be defined?
Are there diversification opportunities for businesses in the area that can be set out as a proposition for other organisations in the area?
Are there trade initiatives being run by the Department for International Trade or others that local firms could benefit from more effectively?
These areas of activity and many others are the types of work that can be planned now and then executed more effectively after the lockdown period. A failing to get some of this work underway throughout April to June would be a massive missed opportunity – it is this type of planning that can help build resilience in the future.
After the planning comes implementation – and a re-examination of the purpose of business engagement.
Opportunities for business engagement
It seems often overlooked, but business engagement creates an opportunity to link the activities of a company into projects that strengthen a local economy and at the same time assist the competitiveness of the business. As with all business relationships there is a need to achieve that ‘win-win’, and undertaken correctly there is no element of philanthropy or altruism involved in business engagement work.
The strategic planning that is done now can add value to the business conversations that will follow – conversations that seek to discover whether the business would find value in areas such as those below (there will be many more):
Participating in a sector group
Identifying new suppliers
Having access to new R&D/skills initiatives
Identifying new routes to accessing talent
Helping define new HE/FE/independent skills initiatives
Discussing collaborative opportunities with like-minded business
Understanding regional markets in which to prototype diversification
Participating in export initiatives
Helping design and delivery of new events in local areas
The time for these strategic and further-reaching conversations is not now – but will be more relevant in the months to follow. The identification of these opportunities now can also help define the priority audience for the future with a planned ‘hit list’ of businesses and the hook that might secure the meeting.
Whilst understanding the initiatives and opportunities that can strengthen the underlying basis of the business is something that economic development professionals always wish they had more time to undertake – for a business these are activities that will almost never be on their ‘to do’ list. It is the translation of initiative and economy into a practical measure for the business that can make business engagement an absolutely invaluable activity.
A high-performing business fully engaged in the local initiatives that help it succeed, but at the same time help strengthen the local economy, is at the core of economic development. ‘Tea and sympathy’, conversely, is burning the resources that we no longer have available.
This article was authored by Nigel Wilcock, Executive Director of the Institute of Economic Development and published here on 20th April 2020.