Identifying Sources for Greater Profitability in 2021

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Photo by David Sinclair on Unsplash

2020 was a Tough Year for the Vast Majority of SMEs

2020 was a rough year for businesses of all sizes and was in particularly tough on industries that are built around social contact; Hospitality, Performing Arts, Air Travel & Night Clubs to name a few. In November 2020 HM Treasury forecasts that the UK economy (GDP) will contract by 11%, the steepest decline in over 300 years since the Great Frost of 1709.

The chart below is taken from Google COVID 19 mobility trends and shows community movements in specific periods within the UK from February 2020 (Pre UK Lockdown) to 1st January 2021. It clearly depicts steep declines in movement in areas of Retail & Recreation, Workplaces & Transit Stations. These sharp falls in activity in those locations have a relationship with economic activity.

Research conducted by CIMA on 500 SME decision makers state that in the trailing 6 months to October 2020 revenues were on average 6.5% down on the prior year. With companies who have 10 to 19 employees fairing worse with average turnover down 13.1% in the same 6 months. Within the same research 70% of the businesses surveyed were confident that they would be trading post Christmas 2020, however some cause for concern is that 1 in 10 of the 500 SMEs surveyed stated that they were not confident of operating after Christmas 2020.

SMEs have been Adapting to the Pandemic

Despite the pandemic and gloomy macro & micro economic forecasts there has been a lot of evidence of businesses adapting within 2020. Towards the start of the pandemic formula 1 teams were teaming up with aircraft manufacturers to assist small ventilator manufacturers scale up their production. Many engineering businesses started to produce face shields and luxury cosmetic giant LVMH started to manufacture hand sanitiser along with many microbreweries.

There are many stories of SMEs adapting their proposition during the pandemic; restaurants & pubs forced to close their doors to the public for the benefit of public health have created take-away…