The impacts felt by small businesses across the UK are estimated to be six times larger as a result of the coronavirus pandemic than they were during the Great Recession, according to analysis undertaken by O2 Business and the Centre for Economic Business Research (Cebr).
The nominal decline in retail sales for small businesses during the Great Recession* was approximately 3.9%, compared to approximately 24% between Q2 2019 and Q2 2020, reflecting the impact of lockdown.
The O2 Business report also reveals that for small retailers, 2019 was the most volatile sales year since 2014 as they saw a 32% swing between the high and low month. Unsurprisingly, 2020 is shaping up to be an unprecedented year, with GDP falling by a fifth (20.4%) during the peak of lockdown (April-June).
Although some recovery occurred when lockdown rules were eased, GDP by the end of August was still 9.2% below that of February, highlighting the significant headwinds COVID-19 is creating for businesses in the UK.
Brits did not let the economic uncertainty dampen their entrepreneurial spirit though as an O2 Business analysis of Companies House data earlier this year revealed almost 200,000 new companies were launched in the first three months of lockdown^.
To help the challenges that SMB owners face, O2 Business has launched the ultimate flexible package, with brand-new tariffs that gives customers the control and choice that the plan they sign up for will continue to suit their ever changing company needs. The market-leading suite of flexible solutions includes automatic data rollover and flexible tariffs so customers can flex their data allowance up and down each billing cycle. As well as flexible add-on business apps such as Microsoft Office 365 so employees can stay productive no matter where they need to work, plus a range of business contract lengths, from a rolling 30-day plan, through to three years.
This comes as an overwhelming majority (71.9%) of small businesses cited the pandemic as the most important cause of negative performance in 2020; however, this varies significantly between sectors. Only 36.4% of small businesses in finance indicate coronavirus is one of the most negative factors, compared to three quarters (75%) in sales, marketing and media.
Prior to the COVID-19 crisis, changes to government policy and disruptive weather were cited as the most common unanticipated factors that affect small business performance across the board. With local competition also impacting an average 4.2% of annual turnover, with the architecture, engineering and building industries particularly sensitive at 6%, whilst the financial sector most resilient at 2.9%.
The findings revealed by O2 Business demonstrate how unnecessary fixed or inflexible business costs can hamper the performance of small companies and hinder their ability to adapt to peaks and troughs in activity throughout the year. On average inappropriate fixed-term contracts represent 16.2% of monthly business costs, with an average of 35.4% of small businesses agreeing that their phone costs remained the same even when headcount falls.
To address this, O2 Business now offers more flexibility than ever before, with packages designed specifically to help businesses flex as they evolve, all whilst having the added peace of mind that they’re connected to the UK’s No.1 Network.
Maria Fernandez, Trading SMB Director at O2 said, “Given small businesses typically have smaller cash reserves for emergencies than larger organisations, the economic shutdown has most definitely impacted them disproportionately. This report highlights how critical it can be for businesses to have the ability to adapt as and when their circumstances change.
“We understand that each business is one of a kind and we all know businesses need flexibility, more so than ever in the current climate. With each tailored package, small and medium-sized businesses will be able to have full control over their usage, complete with our new automatic data rollover, ensuring that customers don’t miss out by losing data they’ve already paid for.”
Daryn Park, Economist at Cebr said,“The Covid crisis of 2020 only builds on the volatility and uncertainty themes that have been coming through over recent years. Our expectation is that the post-Covid recovery period will require firms and businesses to adopt tools that increase flexibility and resilience in the face of the increasing uncertainty and disruption.”