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Will British Businesses Bounce Back in 2021?

Posted: 22 Mar, 2021

British businesses endured a rocky start to 2021 with lockdown 3.0 and the disruption caused by trading difficulties with the European Union. Now, as we near the end of Q1 we’re starting to feel like this is the ‘final stretch’ of the pandemic for businesses to endure and there is much debate over what recovery will look like.

To get businesses through the last few months of restrictions and aid recovery Rishi Sunak’s Budget delivered at the start of this month and described by some as ‘the most important Budget for business in a generation’ focused on securing economic recovery and ensuring business stability rather than clawing back some of the £280bn already spent since the start of the pandemic.

The Budget included an extension to some of the existing support measures, including the furlough scheme until September, and introduced the new Recovery Loan Scheme which will offer loans from £25,000 to £10m up to the end of the year. The current VAT cut (5% rate) for tourism and hospitality businesses was also extended until 30th September and business rates relief for the retail, hospitality, and leisure industry will also continue to the end of June.

During his announcement the Chancellor said the economy shrunk by 10% over the last year but also promised a ‘swift’ recovery. He said the economy is forecast to grow by 4-5% in 2021 and 7.3% in 2022 – the strongest level of growth since 1941.

Overall, optimism for recovery seems high. The GDP figures for January were better than expected, falling only 2.9% compared to the expected 5% and the OECD recently increased its UK growth forecast for the year from 4.2% to 5.1%.

The Governor of the Bank of England, Andrew Bailey, also said recently that he is ‘more positive’ about the UK’s economic outlook and in the Bank’s March Monetary Policy Committee meeting the Bank upgraded its outlook for the UK economy and voted to leave official interest rates at 0.1%.

With extended support measures, a healthier than expected economy and fast vaccine roll out can we expect British businesses to bounce back this year? TMA UK Director, Peter Brewer, is confident that they will.

Speaking to Peter about which sectors he thinks we’ll see rebound, he said “there will be a resurgence in the hospitality space, as people get back out and socialise in pubs and restaurants” and he also thinks the outlook is good for businesses operating in the wedding and staycation sectors.

Commenting on the retail sector, Peter also thinks we will see some recovery but that it will be slower on the “traditional” high street. “The big winners in the last year have been the retail businesses with a strong online platform and those businesses will continue to do well.”

However, while the lifting restrictions are likely to bring a bounce of business back to those that have struggled the most over the last year, particularly those in the hospitality and travel sectors, Peter is concerned about the consequences of the last year of borrowing and the unsustainable state of some businesses that have limped along, trading whilst insolvent.

“There will be a reckoning, particularly when the current limits on possession and insolvency proceedings are lifted. A lot of the support provided to businesses during the pandemic (and particularly in the early stages whilst businesses worked out how to respond) was debt based and evidently that debt will need to be paid back. Similarly, pandemic related rent holidays will come to an end and the rent will need to be paid to landlords. There will be some businesses who simply cannot do that and as a result, sadly, they will fail.”

As ever, recovery is likely to vary industry to industry and business to business. While many businesses may benefit from a bounce in the summer they will likely struggle when they face their overdue rent, deferred VAT and loan repayments.

Overall, businesses can be cautiously optimistic but should keep a watchful eye on their cash flow and continue to communicate with creditors and stakeholders while they rely on them for their continued leniency and support.

TMA UK is part of TMA, a global organisation that represents the interests of turnaround professionals as its members who have the skills needed to assist in these unprecedented times. If you need assistance, please contact our helpline on 0844 804 0116

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