While there are still many businesses in the ‘reacting’ phase of their journey, it’s refreshing to see how many of the region’s brightest and best are already moving into the ‘new reality’ phase, having shown resilience throughout the prevailing business environment. On a par with the likes of Greater London and the South East, a third of Midlands businesses who responded to our monthly poll regard themselves as succeeding in the ‘new reality’ - successfully adapting to new business models and ways of working needed to address essential and obligatory political, economic, socio-cultural, and technological changes.
Such is the mindset of a significant group, that they have continued to innovate during one of the toughest trading periods the region has ever experienced, with nearly a third of businesses investing in new products and services. What’s more, 33% of companies in the East Midlands have acquired another business since lockdown began (19% in the West Midlands). There are opportunities. Just last week, we saw Worcestershire-based carpet maker Victoria announce it would look at acquisitions over the next few months at "very attractive prices" as the listed manufacturer published its latest full-year results.
Others have injected capital into new technology and redefined operations by automating processes that were previously carried out manually. The region continues to develop world-class technology, such as Warwick-headquartered tech start-up Eatron which secured funding for development of new AI-powered software products for autonomy and e-mobility.
So, in a business sense, what does the ‘new reality’ look like? It’s a place where leaders need to anticipate critical changes that will impact their business operations and value chain; where the ‘new reality’ of demand and supply is established in the business; a place where areas for transformation are clear and adaptation is underway; and where businesses are meeting or exceeding expectations.
This is not an easy task. Compared to 12 months ago, 75% of businesses across the Midlands admit that revenues are down by up to half. While more than two-thirds of companies in the region believe it will take between one and three years to return to the same levels of revenue achieved pre-COVID, with permanent job losses almost inevitable.
However, there is optimism amongst the dark clouds. In the West Midlands alone, 18% of companies say they have not furloughed any employees, with 23% choosing not to make any staff redundant. Despite revenues falling, overwhelmingly businesses across the region are confident of being able to repay additional debt taken on in the last few months and growth remains firmly on the agenda in the East and West Midlands. That’s reflected in the appetite to take on fresh talent, with 80% of medium-sized businesses intending to take on more apprentices as a result of the Government’s move to provide companies with £1,000 for each apprentice they take on.
It’s very clear that Midlands businesses have been profoundly affected by the Coronavirus pandemic, with staffing and revenue levels understandably falling, while debt and borrowing has risen. However, in certain quarters, the region has rallied and shown a resilience to invest and take the opportunity to re-think in a bid to recover from the global pandemic. The road ahead is far from easy. The world has changed as a consequence of COVID-19, therefore, businesses need to imagine this ‘new reality’ as early as possible and rethink how theirs will be positioned within it.
If you’d like to discuss the regional outlook further, or you’d like to find out how BDO can help your business ‘rethink’ their future strategy, simply contact Tim.