New figures compiled following the emergence of COVID-19 reveal that the post-election bounce in business leaders’ economic confidence has evaporated.
Confidence is now at its lowest since September 2019, with global economic conditions currently cited as one of the biggest obstacles holding back business, after only domestic economic challenges, and followed by uncertainty over our trading status with the EU.
In response to the outbreak, one in three directors polled had already cancelled or restricted employee travel in their organisation. The most common actions recorded were enhancing office hygiene (58%), and communicating advice to staff (57%), while over four in ten had encouraged remote working. Just over half of those surveyed had so far reviewed their business continuity plans to manage the impact of COVID-19, as recommended by the Government’s recent action plan.
Tej Parikh, Chief Economist at the Institute of Directors, said:
“The coronavirus outbreak poses a significant challenge for the business community, and it is vital that the Government continues providing timely and accurate guidance.
“The UK’s directors are nothing if not resilient. Businesses large and small are already responding with agility, with many already taking sensible mitigating actions at this stage. However, with the prospect of orders drying up and staff in quarantine, some firms will be looking at a potential cashflow crunch, and confidence in the economy has taken a knock.
“Government must be at the ready to take swift action to help cash-strapped businesses bridge this challenging period. The upcoming Budget also provides an opportune moment to lower business costs and support investment to amplify the post-outbreak recovery.”
As the situation develops the Government should keep all options on the table to help organisations facing potential cashflow challenges, particularly in the context of wider cost and adjustment challenges through the year. Policies to be considered could include:
- Enabling companies under financial distress to spread tax payments (such as for VAT, PAYE, and corporation tax) over a longer timetable, without penalty, for example by expanding HMRC’s ‘Time to Pay’ scheme.
- Measures encouraging banks to show forbearance, and for insurers to pay claims quickly, as well as a business-wide effort to encourage large firms to support small businesses in their supply chain.
- Extending government-guaranteed loans, for example via the British Business Bank’s Enterprise Finance Guarantee scheme, to any firms struggling to access finance.
Wider measures the Government should include in its Budget to lower business costs and lift investment include (full IoD submission here):
- Boosting funding for scale-ups and start-ups by easing restrictions on the Government’s Seed Enterprise Investment Scheme and Enterprise Investment Scheme.
- Providing business with financial assistance to help them access the specialist advice needed to plan for Brexit-induced changes across trade, regulation and immigration policy.
- Cut costs by introducing business rates holidays for firms improving or expanding their premises.
- Reduce the regulatory burden, including by delaying the implementation of IR35 and the Digital Services Tax.
Full survey results
920 respondents, conducted between 28 Feb – 9 March 2020.
What level of threat do you think coronavirus (COVID-19) poses to your organisation?
Have you drawn up/revised any business continuity plans in order to manage the potential impact of COVID-19 on your primary organisation?
|Yes, and we have already taken action.||36%|
|Yes, but we haven’t taken any action yet.||20%|
|No, but we intend to draw up/revise our plans soon.||11%|
|No, we will only look at plans when the impacts are clearer.||21%|
|No, currently we have no intention to draw up/revise plans in relation to COVID-19.||11%|
What actions, if any, has your organisation taken in response to the coronavirus outbreak?
|Encouraged remote working.||46%|
|Fully closed an office/premises.||2%|
|Enhanced office hygiene products/cleaning procedures.||58%|
|Communicated with staff, e.g. highlighting government guidance.||57%|
|Cancelled/restricted employee travel.||34%|
|Other (please specify).||9%|
|My organisation has not taken action.||14%|
How optimistic are you about both the wider UK economy and also your organisation over the next 12 months?
|Wider UK economy||Your organisation|
|Neither optimistic nor pessimistic||22%||35%|
How optimistic are you about both the wider UK economy and also your organisation over the next 12 months? (Net % optimistic minus pessimistic)
|Apr 19||May 19||Jul 19||Sep 19||Oct 19||Nov 19||Dec 19||Feb 20||Mar 20|