Business groups urge for extended support after GDP release
- Business groups urged the UK government to extended financial support due to the impact of COVID-19 and Brexit
- Hospitality businesses hardest hit by national lockdown restrictions
- Hair and beauty firms lose approximately GBP 12K due to coronavirus costs
- Restaurant and pub owners optimistic about their post-lockdown futures
British business groups have called for extended help after the Office for National Statistics (ONS) revealed that UK gross domestic product (GDP) data missed consensus estimates.
While the UK economy returned to growth in February – an improvement from the 2.2% slump witnessed in January – the 0.4% increase fell below expectation for a 0.6% rebound.
Recovery was fuelled by activity in the construction sector, which surged by 1.6% month-on-month. Production and manufacturing figures also improved, with gains of 1% and 1.3% respectively.
However, the services sector, which comprises some of Britain’s hardest-hit industries, such as hospitality and retail, disappointed, reporting just 0.2% growth due to ongoing COVID lockdown restrictions.
Furthermore, as UK GDP remains 8% lower than its pre-pandemic levels, British companies have called for additional financial support to counter coronavirus costs and give businesses a fighting chance to restart as the UK begins to exit the third COVID-19 lockdown.
The ONS also revealed that while UK exports to the EU increased by 46.6% or GBP 3.7BN in February, they remain significantly below 2020 levels.
Imports from the EU are also yet to make a notable rebound, as new post-Brexit rules continue to create border friction and hamper trade between the bloc and Britain.
COVID rules have cost hospitality businesses GBP 40K
According to new research from the insurance firm, Simply Business, the COVID-19 crisis has cost restaurant and pub owners approximately GBP 40K.
While many hospitality firms are optimistic about their post-lockdown prospects, the consequences of ongoing coronavirus restrictions, which forced businesses to wholly or partially close, continue to weigh.
Simply Business revealed that COVID rules imposed by the UK government have caused:
- 68% of hospitality business owners were forced to pause trading temporarily
- 45% of firms have been earning less money, despite financial support packages introduced by the Treasury
- Only 27% of hospitality companies have been eligible for the furlough scheme
On April 12th, phase two of UK Prime Minister Boris Johnson’s lockdown easing roadmap got underway, allowing hospitality businesses with outdoor spaces to reopen their doors.
However, business groups have warned that as many hospitality businesses don’t have outside spaces or the financial capabilities to have an outdoor seating area, they are disadvantaged compared to non-essential stores, which have reopened without restriction.
Simply Business expects financial hardship for restaurants and other hospitality venues to continue in the near term, predicting overall losses to amount to GBP 45,470 per firm.
That said, with 89% of hospitality companies pressing forward with plans to restart trade and more than one in 10 new businesses opened in the last 12 months – there is plenty of reason for optimism.
The UK’s progressive vaccine rollout is also boosting confidence. According to a survey conducted by Simply Business, they found that:
- 75% of hospitality business owners were more confident about their COVID restart due to the UK’s vaccination programme
- 63% stated that UK PM Boris Johnson’s lockdown exit strategy had restored confidence in their future business plans
The hospitality industry has been one of the hardest hit by the coronavirus pandemic. The scale and impact of measures imposed to curb the spreading have had a particularly devastating effect on small businesses and the self-employment sector.
Simply Business CEO Alan Thomas said that more should be done to “recognise that behind each of these small businesses is a small business owner and how the impact of the pandemic has impacted their mental health and wellbeing.”
Mr Thomas added: “Despite expectations for a rapid return as lockdown restrictions eased, COVID-19 has caused great distress to individuals and communities, both financially and emotionally.”
The Simply Business CEO did, however, end his statement on a positive note, stating that “there are reasons for optimism as hospitality owners prepare to safely reopen their doors and welcome the public inside for a well-deserved meal or drink with friends and family.”
Patrick Hooykaas, managing director of a leading booking app in the UK, indicated that there had been a surge in restaurant bookings since UK Prime Minister Boris Johnson’s lockdown roadmap announcement.
Other businesses, including the multinational grocery store Tesco, are also expecting a swift return to pre-pandemic levels amid the ongoing relaxation of national lockdown measures.
Tesco expects profits to rebound in 2021
Coronavirus costs have offset Tesco’s exceptional sales as the British corporation revealed that annual profits plummeted by 20%.
While revenues jumped 7% higher in the year to March due to increased household spending, COVID-19 related costs, including hiring new staff to cover employees self-isolating as a result of the virus, have cost the company GBP 892M.
Last December, Tesco announced that it would return GBP 585M in business rates relief to the UK government. It decided to pay back after receiving backlash for paying a GBP 315M dividend to investors.
Nonetheless, Tesco chief executive, Ken Murphy, expects profits to rebound in the new financial year, citing the PLC group’s resilience and strength during the pandemic.
While Murphy expects the group to face another quarter of coronavirus-related costs, he said sales should be much steadier this year as COVID-19 restrictions ease and that a return to profit is likely.
Moving forward, Tesco said they are innovating its online business and building a digital customer platform to strengthen its brand and adapt to changes in customer behaviour as people are visiting stores less frequently due to the effects of COVID-19 lockdown restrictions.
But while businesses are overwhelmingly positive about the future, industry experts expect losses to deepen.
COVID could cost hair and beauty salons GBP 12K
According to Simply Business, hair and beauty businesses have lost an average of GBP 11.6K, and the pandemic could cost them a total of GBP 12,801.
Although hair and beauty salons reopened on April 12th under stage two of the Prime Minister’s lockdown easing roadmap, the pandemic’s deep economic wounds are expected to delay recovery.
Research conducted by Simply Business found that:
- 85% of hair and beauty salons were forced to suspend business operations due to COVID rules
- One in 10 firms have permanently closed due to the impact of the pandemic
- Only 26% of businesses were eligible for the furlough scheme
However, more than 99% of those surveyed said they expect their company to survive beyond 2021 and 100% of firms that had temporarily closed under COVID lockdown restrictions plan to reopen their business.
Simply Business CEO Alan Thomas said he is confident that hair and beauty professionals will operate beyond 2021 and praised the resilience of small business owners under these challenging circumstances.