The UK’s medium-sized companies – responsible for the employment of 7.6 million people across the UK - predict they will only survive the impact of COVID-19 by making radical changes to their businesses, according to a survey conducted by accountancy and business advisory firm, BDO.
Nearly two-thirds (64%) expect the jobs they cut now will never come back. This threatens to put into reverse the job growth driven by the UK’s mid-tier, which had created half a million new jobs in the previous 12 months.
In the first of a bi-monthly survey of 200 medium-sized businesses – which together represent £3.5 billion in revenues and more than 40,000 employees - BDO’s Re-thinking the Economy explores the impact of COVID-19 on these businesses and their plans for the future.
While 79% expect to recover from the impact of COVID-19, more than half of those (56%) believe their businesses will be fundamentally different as a result. Since the start of the pandemic, 44% of medium-sized businesses have launched new products, and nearly a third (29%) have shifted to a full online-only model.
42% of medium-sized businesses expect revenues to return to pre-COVID levels in less than a year, but the same number believes it will take up to three years for trading to recover. And the immediate future is not without challenges. Three quarters (75%) of mid-tier companies have less than six months of cash reserves. A similar number (76%) expect to continue using the Government’s furlough scheme until the end of October.
The findings also point to a smaller, more domestically focussed mid-tier. 42% of businesses say they have stopped exporting and nearly half (47%) have reduced the number of services and products they offer.
The survey also found that Government support has played a key part in business survival. 83% have made use of the Government’s business support measures in some way. 76% felt they’d received adequate support from the Government during the crisis. The Covid-19 Corporate Financing Facility was the most utilised, with well over half (56%) of medium-sized companies drawing from it.
Commenting on the results, Paul Eagland, managing partner at BDO said: “The way in which the UK’s medium-sized businesses emerge from the pandemic will play a huge part in the recovery of the UK economy. We know that companies have been hit hard and job losses have been and will be a painful outcome. But it is encouraging to see that medium-sized businesses are confident about their overall prospects and are planning for long-term recovery. They are making swift changes to their operating models to give their companies the best chance possible, with some seizing the opportunity to expand into new areas.
“There is no denying that this will be a long haul and improvements will be gradual. Careful management of the transition to life without Government support will be critical. Medium-sized businesses are saying they are ready to take decisive action and are hopeful they will come through this, returning their businesses to pre-COVID trading levels.”
The UK’s overlooked and undervalued economic engine of mid-sized businesses will be at the heart of the UK’s economic recovery. They must be listened to and supported if we are to speed up recovery.
BDO is championing the cause and highlighting the challenges of the UK economic engine. We are advising businesses through our own Rethink model (Figure 1.) which provides a road map of support throughout the COVID crisis and by raising the concerns of the economic engine to government and media.
Note to editors
Accountancy and business advisory firm BDO LLP provides integrated advice and solutions to help businesses navigate a changing world.
Our clients are Britain’s economic engine – ambitious, entrepreneurially-spirited and high-growth businesses that fuel the economy.
We share our clients’ ambitions and their entrepreneurial mind-set. We have the right combination of global reach, integrity and expertise to help them succeed.
BDO LLP operates in 17 locations across the UK, employing nearly 5,500 people offering tax, audit and assurance, and a range of advisory services. BDO LLP is the UK member firm of the BDO international network.
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Tom James / Francesca Bliss
Headland Consultancy on behalf of BDO LLP
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