Watch the webinar
We spent a lot of time looking forward during today’s webinar. The restart is beginning to pick up pace and business and government are thinking hard about what the economy will look like as we emerge from Covid-19. For this discussion, we were joined by Tony Danker, CEO of Be The Business and Dame Carolyn Fairbairn, Director-General of the CBI.
Here’s what they spoke about:
- Job retention scheme
- Risk assessments, quarantine and social distancing
- Businesses and the appetite for learning
- Innovators and hibernators
- Brexit, a Budget and the road ahead.
Job retention scheme
Friday’s update by the Chancellor on the job retention scheme (JRS) provided some much-needed clarity for businesses as they plan for the months ahead. Carolyn gave an update on the details. The government will be bringing in a partial furlough scheme “on the most flexible basis imaginable.” The partial furlough will begin from July, with the minimum length of furlough reduced from three weeks to one week. The costs of the scheme will begin to be shared between employers and the government from August with the cost to employers being “tapered in,” eventually settling at a 20% contribution for the employer and a 60% contribution for the government. Employers will pay national insurance contributions and pension contributions from August.
Alongside increased support for the self-employed, the JRS updates were “evidence of the Treasury listening” to the concerns and needs of business, said Carolyn. However, there is a recognition that support cannot “go on forever.” As the restart picks up pace, some sectors will be better able to cope than others. Hospitality and leisure, for example, face a tricky time ahead. Such businesses would benefit from more sectoral help, said Carolyn.
Risk assessments, quarantine and social distancing
Many businesses are concerned about their liability should their employees become ill with Covid-19, particularly as the government is asking for enhanced reporting and publication of risk assessments. However, Carolyn reassured listeners on the webinar that the current guidance is “just an extension of the health and safety regime we have been working with for years.”
The two metre social distancing rule in the UK has also worried business owners, given that other countries have different measures. The World Health Organisation (WHO) recommends one metre, while Germany is enforcing 1.5m. For some businesses – Carolyn mentioned hospitality and film and TV production in particular – those distances are “the difference between life and death.” Although Carolyn stressed the need to follow the science, she also highlighted the place of business to inform the debate.
Carolyn had the same advice on the UK’s decision to introduce a 14-day quarantine for travellers to the UK. We should trust in the science but also look to the examples set by other nations. In June, just as the UK will be beginning its quarantine measures, countries such as Italy will be opening up again. “Don’t hang a ‘UK is closed’ sign over the country at a crucial moment,” Carolyn counselled.
Going forward, international collaboration will be critical for working out how to safely manage travel between countries. Air bridges and safe travel zones will be a key initiative over the coming months.
Businesses and the appetite for learning
“Innovation, tech adoption and efficiency” will be some of the core principles guiding businesses as they look towards the restart, said Tony Danker, CEO of Be The Business. In some ways there was “never a better time to pursue those things,” he said. On the other hand, straitened balance sheets and a “low ebb” on appetite for risk will make considering innovation challenging.
Tony has seen a “big appetite” for learning from businesses during the Covid-19 pandemic. Many CEOs are looking to the example of their peers and competitors to see how they could be innovating. Stories of adaptation and change have been really powerful, he said.
Some businesses have taken this as an opportunity to pivot to activities and business areas they had already been thinking about pre-Covid, said Tony. Firms that worked on a business to business (B2B) basis have moved to deliver direct to consumer, companies that had an ecommerce presence but relied on their stores have invested in their digital capacity and tech adoption has been stimulated across the board. “Necessity is the mother of invention,” he said.
Innovators and hibernators
Be The Business has been studying the response of businesses closely throughout the Covid-19 crisis. Tony explained that in their surveys, they have identified four types of businesses:
- Hibernators: Those who have chosen (or been forced to) close, representing 28% of businesses.
- Survivors: Firms that are operating but at much lower levels of demand. 32% of businesses are survivors.
- Pivoters: Businesses that have innovated to provide different products and services or who have adopted different channels. 21% of firms are pivoters.
- Thrivers: The 6% of businesses that are doing really well.
- A further 12% of businesses have reported no change.
Many companies will have rolled through several of those business types over the past few weeks and months, explained Tony. As we look forward to the restart, companies that have pivoted will have to consider whether they return to business as usual, or whether it will serve them to continue with these new models.
Brexit, a Budget and the road ahead
Tony explained that while some firms are fairly certain about what the future holds, others are in “wait and see mode” they will take big decisions further down the line, with announcements from the government such as a Budget later in the summer guiding decision making.
Speaking about a Budget, Carolyn said that “there will be some interesting political and philosophical decisions going on in government right now” about whether there should be major state intervention in the economy versus concern about government spending levels.
The CBI is concerned with three major areas for the next Budget:
- Mass unemployment and how we get ahead of it, particularly for young people. Investment in skills will be critical.
- Prioritisation of infrastructure spending. Building fibre broadband, new sustainable homes and switching out boilers were three ideas mentioned by Carolyn.
Over the past few days, Brexit “roared back onto the scene, I think quite painfully,” said Carolyn. The CBI is setting out the case to Europe and to the UK government that “businesses are not prepared for a hard Brexit.”
The economic pressures of Covid-19 have eliminated any extra padding businesses had to prepare for Brexit; the economy simply does not have the strength to weather no-deal. “We need to recognise the lack of resilience in our economy if we really are going to tick down to no deal.”
Carolyn stressed that at this moment, both sides of the negotiations need to set aside their “entrenched positions” and come to a compromise. She noted that the opportunity to extend the transition period has likely passed but acknowledged that the idea of a temporary deal – which was raised last week in a webinar with Philip Hammond – could be interesting, although she had concerns about this approach. “The ideal is to say: try and get to something by September. Because that is the point at which you will get to the no-return cost to our economy.”
Key questions we answered:
- Carolyn, how can we utilise technology and productivity to build back better?
- Even prior to this crisis, productivity growth in the UK was flatlining. In 1960, Britain had the highest level of productivity in Europe. Today, we’re at the bottom of the G7.
- This issue has been acute since the financial crisis in 2008. For most people, their standard of living isn’t any higher than it was ten years ago.
- And there is a big regional disparity too – the UK is one of the most unequal countries in Europe, with much of this down to differences in productivity.
- Innovation is the key to survival during this crisis:
- Digital – this crisis has been a lightning rod, with firms reporting they are up to eight years ahead of where they would have been otherwise.
- Flexible working – many firms are planning to work remotely long term.
- Innovating to stay open – many businesses have had to redesign their manufacturing processes or provide new socially distanced services.
- The key to technology adoption is employee engagement, ensuring you bring people on the journey with you.
- Many businesses have become more comfortable with fixes that aren’t perfect but make things better.
- However, the key challenge here is that innovation costs money, and many firms are still in survival mode.
- The CBI is looking at policy solutions with the government, but we also encourage firms to invest themselves where possible. One study found that ‘innovation-active’ businesses were more resilient during 2008 financial crisis – and we expect that to be the same now.
- Tony, how have Be the Business responded to the idea of building back better?
- There has never been a better time to look at technology adoption, efficiency, and innovation.
- However, it’s a very challenging time to do so when cash balances, and risk appetites are at a low point.
- There's a huge appetite to learn from other businesses – to see the strategies they're deploying and the decisions they're making. In particular, we are seeing a lot of SMEs sharing information with each other on how they are innovating.
- Tony, what have businesses been doing around this so far?
- Many firms have responded incredibly well to stories of how firms are innovating – such as zero-office or reduced-office patterns, or the long-term use of technologies.
- If you go to our website, you’ll see increasing numbers of stories of what firms are doing. On Friday we conducted 10 interviews for a new research project on whether or not people are taking big decisions now or waiting.
- We’re finding businesses are still in ‘wait-and-see’ mode.
- Carolyn, what steps should the government take in the context of the budget and a potential Brexit deal?
- We're not surprised to hear there will be a budget in the summer. There will be some interesting political and philosophical decisions being considered right now.
- I think there are big concerns about spending levels.
- There will be real desire to prioritise skills and retraining, and infrastructure spending.
- We hope those will be the key components in the budget alongside some major demand stimulation – as we know consumers have been spending between up to 40% less over the last nine weeks.
- Brexit has also rolled back onto the scene. I had a two-hour meeting with Michel Barnier on Friday morning, and I was able to set out the case that businesses are prepared for a hard Brexit, but are not prepared for a no deal Brexit and being caught unprepared.
- It’s really important to have a joined-up business voice, not just in the UK but across Europe, that says this is a moment for both sides to compromise.