Roadmap to recovery: how will lockdown easing impact business service providers?
On 22 February, Boris Johnson announced a four-stage roadmap for lifting lockdown restrictions in England. The cautious proposals provide citizens and businesses with a route back to a more normal way of life, and were decided upon following a virtual cabinet meeting earlier in the day. As part of this 'one-way road to freedom', children and students returned to schools and colleges on 8 March, and next on the agenda is the reopening of non-essential retail, public buildings, indoor leisure facilities, and outdoor spaces in hospitality facilities, which is due to take place on 12 April at the earliest.
However, for many of us who have become accustomed to working from home, the time frame for returning to physical offices appears to be less black and white. In his address to the House of Commons, PM Boris Johnson advised that 'people should keep doing their jobs remotely unless it is impossible to do so', which sparked concerns among businesses whose revenues have been damaged from the switch to remote work.
Among those concerned are those who operate within the UK's thriving business service industry. Due to their reliance on other businesses across various sectors, until the country's core industries return to business as usual, it's likely they will continue to face the more significant economic repercussions of COVID-19. So, in this article, we'll be taking a closer look at this matter. First, by exploring how the pandemic has affected different business service providers, and then by analysing how the gradual lifting of restrictions is likely to affect their future.
However, before we lay out the roadmap's impact on the business service industry, here's a more detailed outline of the announcements that were covered in Boris Johnson's statement to the House of Commons:
Stage 1 - 8 March
On this date, primary and secondary schools and six-form colleges reopened. Wraparound childcare and other children's activities were allowed to resume, and exercise and outdoor recreation with one other person was also permitted.
Stage 1 part 2 - 29 March
As the second stage of step one, the 'rule of six' for outdoor meets with mixed households was re-introduced. Pubs and bars could resume trading if they have access to outdoor spaces, outdoor sports facilities (such as gyms and swimming pools) were able to open, and outdoor parent-and-child groups of up to 15 people were allowed to congregate.
Stage 2 - 12 April (or later)
Subject to the previous step's success, Stage 2 will see the reopening of all non-essential shops, private care facilities like nail-salons and hairdressers, and indoor leisure facilities, such as gyms, spas, and indoor pools.
Outdoor hospitality will reopen, under the conditions that customers order food and drink at the table; however, curfews and the requirement of ordering a substantial meal will not apply. Other outdoor settings and attractions such as theme parks, zoos, and drive-in cinemas will be able to resume business, and all children's activities will be able to take place inside.
Stage 3 - 17 May (or later)
Indoor hospitality is set to reopen on this date, although venues will still be required to provide table service. Indoor entertainment venues, including cinemas and museums, will be able to open, as well as the remaining outdoor entertainment venues, such as outdoor theatres.
Remaining accommodations venues such as B&Bs, hotels, and hostels will be allowed to open, and adult indoor sports groups will be permitted to take place.
However, the government's recommendations on working from home are set to remain in place.
Stage 4 - 21 June (or later)
If the lockdown exit strategy is going according to plan, on this date, all remaining closed settings will be able to reopen. This includes nightclubs, concert venues, and other large outside or inside events.
For a complete list of businesses allowed to open at each step, please see the government website.
A business service provider is an individual entity that provides services to another company. Also referred to as professional services, the business service industry is very broad, and it encompasses lots of different categories of business operations. Nearly every company relies on at least one of these agencies, and examples of potential service providers for business include advertising, legal, security, leasing, consulting, logistic, management, software, management, and training services, to name a few.
Often confused with financial or transportation services, business service providers do not administer any services related to money or asset management, nor do they carry out transportation duties outside of logistics and shipping.
Due to these sectors' dependence on many other core UK industries, different business service providers have been impacted by COVID in very different ways. With this in mind, next, we consider this while exploring how lockdown easing is likely to impact professional services within the advertising, legal, security, leasing, consulting, and logistic industries.
Much like most other industries in the UK, the advertising sector was hit hard by the impact of Covid-19. Since the national stay-at-home measures were first introduced in March of last year, advertising in public spaces became largely redundant. Overnight, this cut the advertising industry off from a vital revenue stream, while the demand for print advertising also suffered. As a consequence, throughout 2020, the UK's advertising spends decreased by more than £4bn, marking its most significant loss on record.
However, in the face of adversity, advertising agencies responded with resilience. With the events of COVID increasing our daily screen time to an average of 6 hours and 25 minutes, many businesses adapted by strengthening their digital strategy. By harnessing social media platforms, influencer marketing, and popular websites and search engines, advertising agencies were able to find new ways to access potential consumers. However, with this being said, even the digital marketing industry incurred losses due to annual falls in investment.
How might lockdown easing impact advertising agencies?
Now the roadmap to recovery has been announced, the general outlook among advertising agencies appears to be optimistic. With stay-at-home measures being replaced with instructions to 'stay local', and outdoor settings and public spaces opening up as early as April 12th, the lifting of confinement measures is likely to open up valuable opportunities for traditional marketers. Therefore, as out-of-home media spending and TV advertising are set to increase, it's expected that the advertising ad sector will rebound as we enter the spring months.
According to Campaign, current estimates suggest that the sector will grow from 20% to 70% throughout the second quarter of 2021, with projections depending on how strongly offline media channels will be funded once the economy recovers.
The current sentiments of ad agencies are summed up by Dan Clays, chief executive of Omnicom Media Group. When speaking with Campaign, Clays explains that, with social distancing measures relaxing, and travel being among the categories that are "slowly returning to activity", most clients have been encouraged by the government's roadmap to recovery. Additionally, with the Euro 2021 likely to take place, public cinemas opening as early as May, and Love Island being confirmed for another season, advertising spend is likely to increase among most advertising sectors.
Similarly to the UK's advertising sector, our legal services were also not exempt from the events of the coronavirus. According to data from the Office for National Statistics, the UK's legal sector saw a drop in revenue of 12% throughout the fiscal year 2020/2021, with May marking the lowest-earning month in four years. This sobering impact is summed up by Louis Young, managing director at Augusta Ventures, who revealed that "May’s revenue data demonstrated the significant negative impact the pandemic has had on the UK’s legal industry”. Additionally, due to spending cuts among most sectors of business in 2020, commercial and corporate practices were the second-worst hit type of legal service throughout the pandemic.
Furthermore, the closure of all non-essential businesses and the long lockup cycles of legal services also contributed to the potential cash flow issues in many law firms. As a survey by The Law Society’s Law Management Section indicates, throughout 2020, most firms were closed for an average of 155 days. So, as the lockdown restrictions are set to be lifted in the near future, what may this mean for the country's law sector?
How might lockdown easing impact legal services?
As non-essential businesses open, and stay-at-home measures begin to recede, legal firms will slowly be able to engage once again in in-person practices that have long been halted. Networking opportunities, face-to-face meetings, legal events and conferences, and international travel will just be some of the activities that will start picking up as lockdown measures continue to lift. Due to the centrality of these practices to the legal sector, it’s likely that this will help law firms to recover losses that occurred throughout the Covid-19 pandemic.
What’s more, with many government-backed pandemic relief programmes set to expire in Autumn 2021, it’s possible that this may create a wave of corporate insolvencies in the hospitality, retail, and aviation sectors, amongst others. This, alongside a predicted rise in legal cases against digital services, suggests that legal proceedings may rival the rise in litigation cases last seen during the 2008 financial crisis. So, while it may be too soon to predict the future for legal services in the UK, it’s likely that, as measures continue to be lifted, businesses opportunities for law firms will continue to present themselves.
For the security service industry, the response from Covid-19 has been mixed. According to a study from Axis Communications Partners, 47% of security companies surveyed experienced an interruption to trading on some level, and 1% revealed they haven’t been able to find work at all. However, due to an increase in coronavirus-related security threats such as xenophobia, anti-government sentiment, and petty crime, over one-fifth of security agencies actually saw an increase in business throughout 2020.
This rise in COVID-related security cases is exemplified by the case of International SOS, a large UK based security firm. In a report by IFSEC Global, it was found that the coronavirus was linked to half of their security cases in February 2020, with this rising to 75% the next month. So, with the pandemic appearing to boost business among crucial sectors of the security industry, how is lockdown easing likely to influence the revenue of security companies?
How might the roadmap to recovery affect the security industry?
According to the same report by IFSEC Global, it appears that while Covid-19 offered up some profitable opportunities for the security sector, new demands are expected to open up within the industry when non-essential businesses open up again, and social distancing measures remain in place.
As James Wood (head of Security Solutions at International SOS) comments, as workplaces across the country transition to the ‘new normal’, security services need to do what they can to minimise risks, fulfil duty of care responsibilities, and promote workforce resilience. So, whether it’s in the form of temperature tests, remote support to customers, security guards working on the front line to ensure public safety, or security technology that facilitates social distancing, it’s anticipated that enhanced security measures are likely to play an essential role in keeping society safe in the forthcoming months.
Unfortunately, coronavirus and the subsequent national lockdowns have also hindered the UK’s leasing market. This is predominantly because remote working and stay local measures dramatically reduced the need for businesses to use leasing services.
Automobile leasing was struck particularly hard. According to Fleet News, throughout March of 2020, hundreds of thousands of company cars and vans stood unused as the country went into its first official lockdown. This impact was felt hard across the vehicle leasing industry, with 72.6% of respondents of a Fleet News survey reporting that less than 10% of their company cars were being driven for work. Additionally, due to widespread closures and backlogs throughout the maintenance and manufacturing sectors, many agencies who were able to stay in operation through this time struggled to keep essential workers on the road while ensuring all vehicles were safe and roadworthy.
However, other sectors of the leasing industry responded to the pandemic more positively. According to Fleet News, by harnessing the rise of the digital economy, many companies were able to pivot to remote services. This is illustrated in the case of Alphabet, a leading provider of business mobility, who were able to maintain business operations for their customers by introducing remote services like their e-auction platform.
How might lockdown easing impact the sector?
Since most businesses are still required to work from home if they are able to do so for the foreseeable future, it’s likely leasing companies that have adopted remote services will continue to thrive. In addition, with the demand for in-person leasing services expected to gradually pick up as restrictions continue to be lifted, the overall future for the industry is looking bright.
In addition to this, with the recently announced March Budget’s focus on innovation and growth, many expect more startups to emerge as we move further into 2021. This is good news for the leasing industry as, due to cost efficiency and the need to acquire advanced equipment, startups are proving to be valuable customers for leasing companies. So, as established and startup companies across the UK slowly kick start or resume their operations, it’s likely that this will open up valuable opportunities to leasing companies who specialise in both in-person and remote services.
Consulting services have been hit badly by the events of COVID. Due to widespread cash flow shortages, many businesses either paused ongoing consulting projects or cancelled them altogether, leaving the consulting industry in a fragile position. To be specific, according to a survey conducted by Comatch, the coronavirus pandemic led to roughly 30% of independent consultant projects being postponed, with a further 19% being cancelled. This is also corroborated by a survey cited in Consultancy UK, which revealed that, out of the consultancy businesses who responded, 79% saw Covid-19 negatively impact their revenue.
And even established consulting companies haven’t been exempt from the impact. As reported in the Management Sloan School, even the century-old firm McKinsey & Company have had to radically change their approach in order to keep business going. When speaking to the publication, Kevin Dolan, a senior partner at McKinsey, reveals that the company’s focus has shifted to help other businesses through the crisis, with a specific focus on “clients in the travel and entertainment spaces where revenue has dried up; retail and food supply chains experiencing surges from panic buying; or health care providers trying to divert attention and support to the right places.”
How might lockdown easing impact the sector?
Due to the variety of sectors that consulting services are tied to, when industries start opening up again, consultancy firms operating in different industries are expected to be affected very differently. This discrepancy is highlighted in a recent survey carried out by Consultancy UK, which reveals that, while half of boutique consulting firms in the UK are expecting revenue growth in 2021,16% predict that rates will remain flat, and 35% expect revenues to fall.
Specifically, due to the current set of challenges businesses have been facing, consulting firms that offer services in digital transformation, supply chain management, and restructuring, are much more likely to perform better further into 2021. Indeed, according to data from the Management Consultancies Association (MCA), more consultancy services are expected to be required from the healthcare, life sciences, energy, and resources sphere. Therefore, consultancy firms who specialise in these key areas are likely to see revenue rates increase in the near future.
Serving as a vital part of supply chains both within the UK and across borders, logistic firms enable trade by helping businesses transport their goods. So, due to the limitations on the movement and storage of goods, alongside the challenges of social distancing, 2020 has been a uniquely challenging time for the logistic industry.
While demand for logistic services remained strong, alongside the complexities of the national health emergency, most firms have struggled to carry out their operations unimpeded. However, for companies transporting goods across the UK by land, and for logistics firms working with goods that carried fewer restrictions, revenues weren’t as severely impacted. However, as borders and regulations on travel begin opening up again, what does this mean for the future of the logistic industry?
How might lockdown easing impact the sector?
As resource availability improves and international travel starts up once more, a lot of roadblocks for logistics companies will be removed. However, with the industry being under such an extreme amount of pressure, it’s not expected to return to pre-COVID levels for quite some time to come. Due to issues such as reduced manufacturing output, damaged supply chains, the shutting down of entire business sectors, and decreased consumer demands, logistics firms may have to be patient before business returns to normal.
Additionally, with lockdown accelerating environmental concerns amongst many consumers, it’s likely that firms may need to consider low-carbon options in order to ensure their services remain popular in the future.
Overall, due to the unstable financial situations of many UK SMEs, it’s likely that business service providers will be feeling the effects of Covid-19 for quite some time. With businesses across most sectors being forced to differentiate their ‘needs’ from their ‘wants’, it’s likely that the demand for professional service firms and providers may not pick up as soon as regulations are lifted.
However, all of the industries that we explored in this article show striking signs of resilience. And, due to the highly-specialised services that these agencies provide, when businesses start laying down their paths to recovery, specialist firms will be relied upon once more to support this growth.
Until then, adapting to the needs of the market, coming up with innovative solutions, and communicating proactively with existing and prospective clients is the best way for business service providers to remain strong as we enter a post-COVID business landscape.