It’s time for businesses to work out their own plan
Following the Prime Minister’s announcement as to England’s* conditional plan to move out of the present Coronavirus enforced situation, businesses should now be forward planning their own exit from the lockdown.
Businesses will be getting used to their own ‘Real Time Contingency Planning’ (active for a few weeks now) which has undoubtedly made businesses much more agile in decision-making and will now fall into the category of the new normal, thus enabling businesses to become better prepared for all eventualities. This will be bolstered by the promise of guidance on how their workplaces can become “Covid secure”.
Directors and owners will be in a particularly difficult position as they now must create a safe environment which may involve time, a decision on financial investment vs the cost of remaining closed and an assessment of the threat/risk to their staff of not having a safe place to work.
With the Prime Minister urging people who cannot work at home, especially those in construction and manufacturing sectors, to return to their jobs from the week commencing the 11th May, it should be noted that the Chancellor will be looking to withdraw or reduce grants available to business.
All the more reason for all businesses to plan ahead and to consider our exit strategy checklist.
*lockdown measures for the devolved nations (Scotland, Wales and Norther Ireland) may differ.
Forecasting and financing your way to a brighter future
How to Reboot your Business Model
Click the headings to jump to each section of this in depth #BrighterThinking.
Section 1 – The key recovery issues
Don’t be complacent in recovery.
– Planning and Reorganising
– Bringing Employees out of Furlough
– Social Distancing and Employee Welfare
– Gov.uk’s 8 working safely guides
– Home workers
Meeting your ‘time to pay’ arrangements.
The key recovery issues
Before we explore what your Exit Strategy Checklist may look like, let’s explore some of the key considerations that all business owners will need to address ahead of implementing their own recovery plan.
Don’t be complacent in recovery
Simon Underwood – Business Recovery Specialist
DD: +44 (0)20 7465 1932
On Sunday evening, the Prime Minister pressed the reset button on the UK’s economy. Clearly the next steps are going to be tentative as it is important that we do not have a second peak. Further information will follow during the course of this week with the promise of substantive details on Wednesday.
Whilst the lockdown had its own challenges going back to business as usual, or something that resembles business as usual, will probably be more difficult. Now is the time to review your cashflow modelling and remember that cash remains king. Re-visit your debtor ledger and make sure all clients are paying or subject to a payment plan.
As revenues grow, working capital will come under significant pressure, particularly as the Government will need to reduce the level of support it has offered to businesses to date. Having a vision about how your business circumstances will improve together with an action plan is critical to ensure recovery. This plan will need to review the business and working environment, your clients’ needs and expectations and understand whether employees are prepared and able to travel to work.
The Menzies business recovery team are fully operational working from home and ready to provide advice on any financial challenges you may be facing.
Ed Hussey – HR Specialist
DD: +44 (0)1784 497105
As lockdown measures start to ease and a focus on economic activity returns, employers and employees will face several challenges, namely:
- Re-organising their business in line with demand levels.
- Bringing employees out of furlough and the eventual withdrawal of the scheme.
- Adapting to social distancing rules and maintaining the health and safety of their workforce.
- Managing employees who are unable to work due to the continued effects of the virus.
- Adapting longer term to the challenges and opportunities that this unprecedented period has presented.
In the course of planning for this next phase, bear in mind the position of employees at this time. They are likely to be either a) furloughed and worried If they will have a job to come back to, b) working from home and trying to juggle family issues and their own wellbeing, or c) going to the workplace, navigating social distancing arrangements and trying to stay safe. There are unusual stresses involved all round and so plenty of open, considerate communication and consultation is advisable.
Planning and Reorganising
You will doubtless be looking carefully at the changing demand for your products / services and how to adapt your workforce accordingly. Until at least the end of July, you can place/leave some staff on furlough and retain or bring back others that you need in order to scale up.
Bear in mind:
- Some employees will find it easier to return than others – ask your employees about their circumstances and who is in the best position work. Take account of personal circumstances when considering who to bring back first.
- Those who can work from home are probably best left to do so; but consider the critical communication requirements to ensure everything stays ‘joined up’.
- You can effectively rotate employees on and off furlough but bear in mind that each period of furlough must be a minimum of 3 weeks to be able to claim from the Government.
- It is possible to bring people back and make amendments to their working and pay arrangements, subject to their agreement. It may be that you need to consider increased, decreased or flexible working arrangements to match available resources with demand. These are all possible with the agreement of employees through consultation.
- If you believe you need to make redundancies either during or immediately after furlough, it is possible to manage the process whilst employees are still on furlough. All of the usual consultation arrangements still apply and the practical application will therefore require some thought.
- Questions relating to notice periods during furlough are very complex and require close attention and advice.
- When the furlough scheme ends, leaving staff on furlough is a potential option if you are unable to bring them all back but want to maintain the possibility. This will depend on the nature of the furlough agreement in place with your employees, so check it and renegotiate if necessary, to provide you with this option. You clearly won’t be able to continue making furlough claims from the government, but some kind of continued leave arrangement may be worth exploring if your existing contracts do not provide for ‘lay-offs’ (which most don’t).
- Communicate with your whole business about what you are doing, how it is going and your further plans.
Bringing Employees out of Furlough
Remember that the principles of employment law still apply, so make sure you act in a fair and reasonable manner.
- If you have to make decisions about who to bring back and who to leave on furlough, make them on a fair and objective basis. Take account of personal circumstances in relation to the outbreak.
- If you are bringing employees off furlough, there is no prescribed notice period, but make sure you honour any arrangements that were in your furlough agreement and otherwise provide as much notice as possible.
- Confirm in writing the date on which you are bringing back the employee from furlough and the position as regards their terms and conditions of employment – either back to normal or incorporating any agreed changes and the relevant dates if these are temporary.
- Furloughed employees will not have been doing any work and so will need to be updated on any changes.
- You may wish to consider incentives for those returning to work, to create a differential with those continuing on furlough. Take care not to breach discrimination laws here, for example by indirectly discriminating against older or disabled workers without legal justification.
Social Distancing and Employee Welfare
The Government are now encouraging people to return to work whilst observing social distancing measures both in terms of journeys and also in the workplace. Organising the workplace and providing protection measures to staff who have to be on site will be key to maintaining your duty of care.
Key issues to consider are:
- Ensure that all those who are able to work either entirely or partially from home can do so.
- Consider working hours arrangements that allow workers to avoid peak travel times and the use of public transport as far as possible.
- Reinforce social distancing guidance regularly and observe government guidance for employers, including the sector specific guides: GOV.UK Guidance for Employers, including
- Support those who are ‘vulnerable’ or ‘extremely vulnerable’ and those who they live with to follow their own specific guidance for social distancing and shielding.
- Review the necessity of any activities where social distancing cannot be followed in full and, if they have to continue, take all mitigating actions possible. There are specific examples provided here: GOV.UK sector specific guidance
- Consider whether the use of PPE is appropriate and ensure this is supplied if required.
- Emphasise that anyone who is unwell with Covid symptoms, or becomes unwell at work, or who lives with someone with symptoms, must not travel to the workplace and should follow the Stay at Home Guidance.
- Fully brief staff who are having to attend the workplace about the measures in place to protect them.
- Make handwashing / sanitising products easily available – including ‘pop-up’ handwashing stations if possible – and remind employees to wash their hands frequently for 20 seconds more frequently and catch coughs and sneezes in tissues.
- Arrange your cleaning regime to ensure the frequent cleaning and disinfecting of objects and surfaces that are touched regularly, using your standard cleaning products.
- Reduce to a minimum the sharing of equipment and provide sanitisation facilities in between each use when this is not possible.
- Adjust layouts and restrict movement flows as far as possible to assist with social distancing.
- Use floor markings to indicate 2-meter separation distances where it is possible to remain that far apart, particularly in areas that may become crowded.
- Where it is not possible for staff to work 2 meters apart, they should not work face to face as far as possible and, if they do, keep this to maximum periods of 15 minutes.
- Become paperless as far as possible.
This is not the full advice available, please use GOV.UK links for more information.
We recommend that you encourage your employees to contact someone senior to discuss concerns they have about any aspect of the situation, including their personal situation, so that they can be informed and supported during this time.
Working safely guidelines
The UK Government has released a series of new ‘Working safely during coronavirus (COVID-19)’ guidelines. Published to Gov.uk, these 8 guides cover a range of different types of work. You may need to use more than one of these guides as you think through what you need to do to keep people safe.
Guidance for people who work in or run outdoor working environments.
Guidance for people who work in or run factories, plants and warehouses.
Guidance for people working in, visiting or delivering to other people’s homes as well as their employers.
Guidance for people who work in or run indoor labs and research facilities and similar environments.
Guidance for people who work in or run offices, contact centres and similar indoor environments.
Guidance for people who work in or run restaurants offering takeaway or delivery services.
Guidance for people who work in or run shops, branches, stores or similar environments.
Guidance for people who work in or from vehicles, including couriers, mobile workers, lorry drivers, on-site transit and work vehicles, field forces and similar.
Remember your Employer Data Protection responsibilities
The ICO have published new Q&A guidance on Coronavirus testing of staff in the workplace and how employers can ensure they remain compliant with all data protection legislation.
Consider pointing those who are working from home towards advice on how to maintain their health and wellbeing during this period. This can include maintaining a structure and separation between home and work as far as possible within the environment; taking regular breaks; getting out and about, maintaining contact with colleagues, etc.
As homeworking continues, employers should consider their duty of care and how that extends to the home working environment. Do your home workers have the right kit and a questionnaire to help them assess the risks in their current workstation set-up?
If home working is going to become long term, consider an agreement that covers aspects such as hours of work and flexibility, continued application of company policies, reporting requirements, data security etc.
Don’t forget about your home workers! Some will be well suited to the arrangement and others will struggle. Anything from practical considerations through to their personality type will determine how well they get on, and many will be affected by the stresses of isolation. Managers have a special responsibility to stay in touch, ask how it’s going and offer support.
Meeting your ‘time to pay’ arrangements
Will Sweeney – Tax Technical Specialist
DD: +44 (0)1483 758926
While these measures have provided much needed breathing space for many firms while they consider their next step, or apply for other finance, it should not be forgotten that they come to an end. Many companies’ trading position may not have recovered sufficiently to deal with these debts when they next fall due for payment.
Clearly this could present a major cash-flow issue for some companies and so clear financial forecasts (see below) are essential, both in planning how to settle these arrears, or if this proves impossible, in requesting further deferrals. This may include working with landlords to agree a workable solution or applying to HMRC for a bespoke ‘time to pay’ arrangement.
How might the UK’s business sectors respond?
Click the icons to jump to each of our sector assessments
Covid-19 has significantly impacted the sector and there is considerable uncertainty about the future. For now, businesses need to consider what strategies could be employed to maximise future prosperity and learn lessons from the pandemic that could put businesses in a stronger position going forward.
The benefits of effective forecasting and planning for the future of business can no longer be ignored. Based on realistic assumptions, a forecast should be considered from THREE linked elements (a three-way forecast):
- Profit and loss
- Balance sheet
Knowing what your business will look like in the next 12-18 months and beyond is crucial and, if reviewed regularly, a three-way forecast will help ensure that the best decisions can be made.
Whilst economic contraction has clearly begun, it should be said that this is not a financial led recession and it is likely that any recovery will not be as long compared to past events like the 2007 credit-crunch.
As such being ready to capitalise on potential customers and increase demand but not playing on people’s fears e.g. ‘Come and buy life assurance from us before this happens again’ might not be the most effective marketing strategy so could you consider:
- Offering free ‘new world’ reviews or more regular remote face-to-face reviews?
- Publishing explanations/blogs on key issues and impacts to build trust?
- Exploring emerging markets e.g. green/social responsibility?
- Highlight importance of a greater understanding of your portfolio?
Working from home has become the new ‘normal’ and whilst this has been working well, it has not been without its challenges. Having said that it has become apparent that many teams’ priorities are changing and are not in a rush to enter back into a full week of office working. Other priorities include:
- Job security – have you reassured your existing employees that their jobs are safe and of your future plans?
- Agile working – What can you do to support an existing (or potential) employee in working remotely and what tools could enable them to work more efficiently?
- Corporate Social Responsibility (CSR) – in light of growing support of the NHS and vulnerable what can (or should) your business do to support charities and/or local communities and employees working for good causes?
- Increasing work-life balance – how might improved diary management and reductions in commutes improve productivity?
Investment and debt
As a result of utilising ‘time to pay’ arrangements, CBILS or delaying payments to suppliers, man businesses will have more debt and it will therefore planning will be key to manage these liabilities as and when they are due. However, if a business can utilise its debt effectively and take advantage of the increase in demand, growth and investment may be possible.
Customer facing assets
Remember – how you present propositions to customers will have a lasting effect on them. Could these be tailored help your business to stand out from the competition or perhaps present data in a clearer/more effective way?
If we’ve learned anything from lock-down it is that meeting over Zoom or Teams works. Video conferencing may have become the norm but having the right equipment will make all the difference for you, your teams and your client’s experience.
In times of crisis, collaboration is key and programs like Microsoft Teams and Slack (which have seen a surge in use) can prove invaluable to ensure that internal (and external) messages are conveyed effectively. It’s important though to think creatively and look beyond just messaging and consider how these can be maximised.
Is it time to consider moving local systems into the cloud? Accounting systems such as Xero allow real-time reporting and can assist with forecasting, while WorkflowMAX can provide a deeper understanding of your sales process. Or perhaps a client portal or digital repository for any contracts and documents could reduce queries?
With so many off-the-shelf options and integrations available, cloud systems could provide invaluable reporting/forecasting functions that also improve business efficiencies.
This remains a difficult time for all businesses, so planning and forecasting has never been more important. Whether your objective is to just keep the doors open or you’re looking to invest in opportunities, people or technology, knowing where you stand now and where you may be in 12-18 months’ time, having a detailed plan in place will help you get there.
Property & Construction
The construction sector – whilst being excluded from the strict lockdown measures – has found itself having to get to grips with new guidance on ‘Site Operating Procedures’. This has included decision making on whether or not it was safe to continue, in what form and giving due consideration of the commercial and contractual issues that this gives rise to. The construction sector does not lend itself easily to social distancing and whether sites have adapted to remain open, stopped altogether or paused and then reopened, the sector has already considered in great detail how they can now operate in a safe way.
As lockdown measures are eased/lifted, this hard work and planning should enable the whole of the construction sector to be on the front foot with the proviso that it is unlikely that site operations will not return to the pre-Covid state. There must also be an acceptance that there will be continuing disruption due to the necessary changing working environment, e.g. continued social distancing potentially meaning reduced numbers on sites, phased shifts etc. That said, the increasing operation and output from the construction sector will filter down and have a positive impact on the wider services that feed into this; for example surveyors, architects whose work is largely carried out on site.
Commerical property market
Away from the construction sector many commercial property landlords have been greatly impacted by tenants who haven’t been able to pay their rent. Any progress to ease the restrictions will take time and retail and leisure/hospitality will recover slowly and subsequently pressure on tenants and then landlords will ease. However, we would strongly recommend that landlords and tenants have open and honest discussions in order to reach an agreed position on any rent arrears.
Going forward the ‘new normal’ may mean that the working habits of commercial tenants may change or see these tenants reduce their company office space. This will have an ongoing impact on the commercial property market, but only time will tell as to how much practices do change.
Residential property market
The residential property market is directly impacted by public confidence and its growth had been impacted for some time before Covid-19. With the undoubted rise in unemployment, even if only in the short term, plus a general increase in job insecurity any recovery to the residential market is likely to take much longer.
A big part of returning to “normal” factory process will be your people. Not only how many people to bring back and when, but other key considerations such as how to socially distance within a factory and what roles exist in your “new normal”. Whilst lockdown has had many negative impacts on production and output, this is the time to step back and consider whether there is anything that could be done differently as we restart. Were there any efficiencies or better ways of working identified through lockdown that could be implemented more formally going forward? This is a time for learning, across the board, and an opportunity to consider from the outset how things can change for the better.
Businesses in the technology sector should be better placed than most traditional businesses to adapt to new working practices and move forward as we move out of the lockdown.
They tend to be less office orientated, more agile businesses which are often used to remote and flexible working practices. As we move forward it is likely they will have a head-start over other firms adapting to the new way of life.
Some technology focussed businesses have also enjoyed relative success in the last few months, as a result of the unique situation. This has included businesses in the content streaming sub-sector, as well as communication and social media companies.
It is also true that a number of opportunities will arise for businesses in the sector who are able to quickly provide technological solutions to new requirements arising from the crisis.
Transport & Logistics
With UK Logistics continuing to operate through the lockdown and its people classified as key workers, the sector has had to make major operational and financial changes as well as find new ways of working to see them through these hard times.
With many major airlines in financial difficulty, fewer carriers in the sky could leave haulage fleet operators with empty, stationary or under-utilised vehicle capacity. Therefore, we may see more consolidations, mergers and industry partnerships. For pure Haulage companies – who operate at a margin of 2% – cost and operational efficiencies will be key as without these measures, price rises will be inevitable and impacting on all of us, as the end user.
Differentiation, flexibility and agility will be vital factors. Being able to adapt to demand and broaden the businesses’ customer/market base is key, pivoting the business towards online fulfilment opportunities – particularly for those specialising in markets which have been significantly impacted by Covid-19 (e.g. events industry, luxury goods etc). Equally, this may be a good time to consider new technologies and cloud-based software to aid business agility and operational efficiencies.
In these unprecedented times, business owners need to fully understand cash inflows and outflows and how they link with the different operations within the business. Businesses with good cashflow management and modelling can closely monitor finances, assess risks and respond faster than businesses who don’t fully understand or have access to their data.
Maintaining close customer relationships in these trying times has never been so important. For T&L businesses the focus should be on keeping repeat business, paying close attention to credit terms to ensure debts are recovered and limiting the impact of any potential bad debts.
Despite the availability of payment holidays, T&L businesses should be under no illusion that payments for fixed costs (the very nature of the operations) e.g. warehouse rent/utilities, vehicle finance payments will need to be factored into future forecasts, although when this may be is unknown. To minimise risk it will be crucial that during this exit and recovery phase income on completed jobs is closely monitored as all costs will be incurred before receiving payment.
With an estimated 46% of trucks sat stationary and 25% of drivers furloughed, driver demand is likely to be high on a return to work, so keeping staff safe, motivated and financially secure will be a key priority.
All T&L businesses should make use of any/all available indirect tax and reliefs:
- Deferral of VAT returns payments – currently permitted for payments due up to 30/06/2020
- Consider applying for import VAT and duty payment deferment and agreeing time to pay arrangements with HMRC
- Confirm any VAT repayments that are due as these will continue to be paid
- Where customs authorisations are held or are being applied for, make use of HMRC’s available easements to assist with the administrative, procedural and staffing requirements
- If transporting essential coronavirus goods, check for available reliefs, such as import VAT and duty relief for imported medical goods and other requirements, such as export licences
- Where HMRC are undertaking an audit, there is an option to suspend or continue, which can assist in managing resources
- Be aware of the impact of Brexit and the Customs Declaration Services (CDS) implementation.
HMRC will review and update guidance in respect of the above as the situation develops, so note that timeframes may be extended and other goods may become eligible at a later date.
Retail & Wholesale
Retail is ultimately driven by consumer behaviour and this pandemic will have an effect on how we all behave. Online sales were already increasing and lockdown is only going to increase this as consumers have been forced more and more into online purchases and there are some who are likely to be nervous about going back into a physical store.
On exit to lockdown, retailers need to consider how they will reach their customers and make them feel safe. For those who don’t already have it in place, delivery and click & collect options will become increasingly essential. Physical store lay-outs need to be considered to protect both the customer and the staff who may equally be nervous. Shortened opening hours, restrictions on capacity in stores, closing changing rooms and card only payments are all things which need to be carefully reviewed.
Retailers need to make their physical stores feel safe so availability of screens at tills, space to queue, disposable gloves and disinfectants are required to make people feel comfortable. Supply chains also need to be examined closely to ensure that products can still be delivered safely and on time. Now, more than ever retailers need high quality real-time information and accurate forecasting so they can assess demand and costs and make the correct decisions for the future of their businesses.
Hospitality & Leisure
The Hospitality & Leisure industry has been significantly affected by Covid-19 with most businesses closed and those remaining open relying on a significantly reduced income. As in other countries, we are expecting the government to be very specific on the timing for the reopening of hotels, restaurants, pubs and other leisure businesses and also further restrictions on customer numbers which will limit the ability for businesses to maximise income and profits. This will be particularly difficult for businesses during what should be there peak trading periods and this will have a longer term profit and cash flow affect.
We would recommend that all businesses devise and implement an exiting lockdown plan, including how they will trade with the new restrictions and whether change can be made to maximise sales revenue, staffing plans and how they will deal with costs when the furlough scheme ends, preparation of a financial forecasts and ongoing discussions with lenders, marketing plans etc.
It is clear that the impact to the industry will go beyond the next few weeks and businesses need to ensure they are best placed to maximise future profits.
Your exit strategy checklist
To date the UK government’s help has been much appreciated but every business needs to have their own detailed, robust and well-considered strategy in place. This will encompass the lessons learnt through tackling the onset of the crisis, surviving the duration and ultimately emerging well prepared to face the other side.
Menzies post-lockdown business checklist
Be sure to have a detailed cashflow forecast and if possible, a joined-up profit and loss and balance sheet (interactive with cashflow); this is often referred to a three-way forecast and should focus on the medium term timeline – this enables businesses to really understand the impact of decision made right now on future cash flow.
Businesses have been deferring a lot of liabilities and they need to understand what this means in the medium term, particularly if they’re trying to work out whether to borrow additional funds – how much do they need and can they afford to repay it?
Be in possession of good management information. This will be crucial to making good, strategic and agile business decisions as well as giving you visibility over liabilities deferred and those new due dates.
The data may also highlight any additional funding requirements, whilst allowing you to effectively stress test and fine tune your exit strategy.
Spend time interrogating your pipeline including any transactional work that dropped off at the end of March and other opportunities arising. This will help you to assess the level of activity and the likelihood of these coming on stream. Be aware that where business diversification has taken place, this may have changed.
A sensitivity analysis of the above is also recommended to identify any possible delays in expected upturn.
Carry out a forensic review of your supply chain e.g. components or staff, linking back to your pipeline and/or order backlog.
Continue to analyse your staffing levels within your return to work plan being sure to measure both positive and negative capacity issues.
For a departmental or diversified business, this will involve analysing each team, production area or service line as they will all come back online at different speed.
Stay close to existing and previous customers/clients. Whether this is done by email, social media or, most effectively by phone/conferencing facilities – your clients will feel valued and looked after which in the long run may help you build your trusted advisor/partner/key supplier status.
Your aim should be to feed the pipeline by re-confirming (or re-engaging entirely) in order to add certainty to a period which could be very difficult to predict.
Identify any competitive advantages that have come to light in this period. Are there some weaknesses in your direct / indirect competitors or even gaps in the marketplace that can be seized upon?
Invest in your ongoing internal communication strategy. This will be critical to ensure that everyone within the business knows what is expected and any appropriate parameters to work within.
This is especially important in relation to pricing and all client / customer facing personnel need to have a full grasp of the current pricing model, so that value can be clearly articulated and where possible margins understood and protected.
Review your current retention model and consider whether instead of extracting all profits you should set a new benchmark so that the business can retain cash and reserves for contingencies.
Talk to our specialists
DD: +44 (0)20 7465 1932
Business Distress & Insolvency Specialist
DD: +44 (0)1489 566706
CBILS & Corporate Finance Specialist
DD: +44 (0)1252 894921
Cash Flow Management & Forecasting Specialist
DD: +44 (0)1489 566702
Business Strategy Specialist
DD: +44 (0)1483 758919
DD: +44 (0)1784 497105
HR & CJRS (Furlough) Specialist
DD: +44 (0)1252 541244
Employer Tax & CJRS (Furlough) Specialist
DD: +44 (0)1784 479199
HR & CJRS (Furlough) Consultant
Need help with your Coronavirus exit and business response plan?
Whether you’re unclear about your next steps or simply want a second pair of eyes to review your plan, get in touch with one of our team, your Menzies relationship manager directly or via the contact form below.