What impact will the COVID-19 vaccine have on small businesses?
After an extremely challenging year for small-to-medium-sized-enterprises (SMEs), many business owners are finally starting to see a light at the end of the tunnel as the government rolls out the most extensive inoculation programme the UK has ever seen. With no time being spared, the NHS is planning to administer the first vaccine to the nine priority groups by 15 April, before delivering it to the remaining population before the end of July. So, with a clear path to recovery being outlined by the government, businesses owners are beginning to consider what a post-COVID-19 future may look like.
However, due to the tough economic circumstances many small businesses are finding themselves in, and the unpredictable nature of COVID-19, it's unlikely that growth for many SMEs will be linear. So, by taking into account the vaccines timeline, what dates key industries are set to open, as well as what roadblocks may still remain, this article explores how Covid-19 immunity is set to impact small businesses in the UK. However, before we consider these things, we will outline the current reality facing businesses today.
COVID's impact on UK SMEs
Since the government first mandated business closures on 23 March 2020, companies from just about every industry felt the repercussions. However, it's clear that small businesses and sole entrepreneurs have suffered more than most. During the first lockdown, the pause in trading and the overnight collapse of entire sectors saw the UK's total GDP drop by 24%. According to data from SimplyBusiness, this abrupt lack of revenue cost small business owners an estimated £11,799 on average. As a result, an estimated 67% of small businesses were forced to stop trading throughout 2020, and 234,000 SMEs closed permanently.
Despite economic activity picking up through the summer months, a new variant of the virus drove up COVID infection rates once more, and lockdowns were reintroduced throughout the country. These measures led 42% of businesses to experience a decreased turnover as they entered the new year, with revenues being hit hardest across the accommodation and food services, other services, as well as the construction industries. With confidence reportedly at an all-time low, an index by the Federation of Small Businesses indicates that the prolonged effects of the coronavirus could put a further 250,000 small businesses at risk of going out of business this year. So, with the damage to SMEs proving to be extensive, it's no surprise that so many enterprises are pinning their hopes on large-scale immunity.
At the time of writing, those aged over 70, care home residents, healthcare workers, and people required to shield have already been vaccinated. These four groups took priority because, between them, they have accounted for 88% of deaths so far. Moving forward, these are the dates when other key groups are due to receive their first vaccine:
Phase 1 - Before 15 April
In the second part of phase 1, all citizens aged 60-69 are next in line to receive their first dose, followed by those aged 16-64 with underlying health conditions, or who are unpaid carers for the elderly and disabled, and those aged 50-59. This should bring the total amount of people who have received their first dose up to 32 million.
Phase 2 - Before 31 July
In the second phase, members of the population aged 40-49 will be next to be vaccinated, followed by those aged 30-39, and then finally those aged 18-29.
According to the government's recent COVID-19 response, the re-opening of businesses will take place in four phases, subject to:
- The vaccine programme being deployed successfully
- There being evidence that shows that vaccines are sufficiently effective in reducing hospitalisations and deaths among those vaccinated
- Infection rates being kept under control
- Risk factors not being increased by new variants
Assuming these four vital tests are met, according to the government roadmap out of lockdown, businesses and venues are likely to open up again following this order:
Step 1 - 29 March or after
By this date, outdoor sport and leisure facilities may be able to restart. This means that outdoor gyms, swimming pools, sports courts, golf courses, water sport venues, and climbing walls might be able to open their doors to customers once more.
Step 2 - 12 April or after
If the vaccine rollout is going according to plan, step 2 will begin to unfold. This step will be confirmed a week in advance, and would allow the re-opening of non-essential retail shops, including charity stores, clothes shops, homeware shops, electronic goods retailers, retail travel agents, and photography studios, to name a few.
This step would also see the opening of personal care facilities, including hairdressers, barbers, beauty and nail salons, and piercing and tattoo studios, as well as indoor sports and leisure facilities, such as regular gyms, indoor pools, and climbing centres, and self-contained holiday accommodation.
Critically, this second step also allows hospitality venues to open up outdoor spaces. This means that cafes, restaurants, bars, pubs, and social clubs will be able to serve customers outdoors, as long as table service is in operation. Additionally, the sale of takeaway alcohol will be reintroduced.
From this date, outdoor attractions like adventure parks, theme parks, animal attractions, and drive-in cinemas or theatres may also be permitted to resume trading.
Step 3 - 17 May
At least five weeks after step 2, subject to the government's four tests being met, the following businesses may be able to re-open: indoor entertainment and visitor attractions such as cinemas, concert halls, museums, galleries, bingo halls, bowling alleys, and remaining holiday accommodation.
Step 4 - 21 June
Finally, at least five weeks after step three, the government's fourth and final step out of lockdown will take place. Step 4 will see all remaining businesses and venues open, including nightclubs, the inside of hospitality venues, and events containing large numbers of people.
While the government's roadmap to recovery outlines when public services and certain businesses are able to re-open, no specific indication has been given as to when workers should return to offices. This means that, in accordance with previous advice, until offices reopen from the 21st of June, everyone who is able to work from home should continue to do so.
To help you with your path back into the office, below are some critical steps to help make this transition as smooth as possible.
- Before the end of March or the beginning of April, communicate with your team to find out if they'd prefer to work in-house, remotely, or flexibly.
- By the beginning of April, figure out if your existing workplace is able to meet your team's requirements.
- By mid-April, if your current workplace setup is unable to meet the needs of your employees, start searching for a more suitable workplace. Alternatively, if you're staying put, plan any necessary changes to the working environment.
- By mid-May, if you are moving your workplace, make sure a contract has been signed.
- Before the middle of June, make sure that any new policies and processes are enforced and that the workplace is COVID secure before the 21st of June.
The future of work is likely to remain hybrid
However, even after offices re-open and the majority of employees are vaccinated, large portions of the workforce are expected to remain at home. As a survey from Gatner, Inc revealed, 90% of business owners plan to allow employees to work remotely at least some of the time, even after the COVID-19 vaccine is widely adopted.
In addition to this, 65% of respondents plan to offer their employees flexible working options regarding when they work. Even post-vaccine, 62% are planning to continue all COVID safety measures, including mask-wearing and social distancing. So, due to the lingering effects of the virus, and gradual shifts in employee preferences, it's very likely that the future of work will remain hybrid.
Despite the continuation of remote working for many offices across the country, the vaccine rollout and subsequent re-opening of public enterprises are giving many business owners a reason to be optimistic. This optimism appears to be for a good reason. According to research from the Barclaycard Payments Barometer, the average revenue for each UK SME is expected to grow by 8% throughout 2021, with this figure rising to 11% in the capital. In addition to this, four out of five SMEs surveyed are planning to invest in their business over the next 12 months, which is an increase from two thirds last quarter.
When explaining how many businesses have used the challenges of COVID to build their resilience as they head into the future months, Rob Cameron, CEO at Barclaycard Payments, comments: "While the world may be returning to some form of normal this year, small businesses have realised the benefits of flexible working and digital skills, with many already looking at what improvements they can take forward into 2021."
This cautious optimism isn't just felt among businesses. Following the mass vaccination rollout, in their annual Monetary Policy Report, the Bank of England agreed that the ambitious vaccine programme paints a positive picture for future growth. Additionally, with Rishi Sunak extending business rates and the furlough scheme into the late summer, hopeful sentiments were also expressed by business expert Kate Hardcastle MBE, who tells Retail Times that "There is certainly cautiousness about the months and even years ahead, and there is no trivialising the tenacity that will be required, yet, as more organisations find better working practice along the way for stakeholders, customers, and local-entrepreneurism, this could also symbolise a significant turning point for many businesses."
However, while the government's roadmap out of lockdown anticipates a return to normal life by the 21 June or after, delays in the vaccination programme could postpone this process significantly. From manufacturing shortages to logistical challenges, several bottlenecks could prevent the timely deployment of the vaccine. With the new variant's effect on the UK's virus rates still relatively unknown, it's safe to assume that the COVID-19 pandemic will continue to be an ongoing issue in British society for a long time going forward.
Additionally, even if the UK achieves widespread immunity on-schedule, SMEs still aren't expected to rebound overnight. With 2020 marking the worst annual fall to GDP the UK has seen in 300 years, cash flow shortages, reduced consumer demand, and gaps in supply chains are just some of the initial roadblocks small businesses will be faced with as we move further into 2021. These fears are realised in recent data from Santander, which reveals that, out of the small businesses surveyed, one in 12 were unsure whether they would survive the next few months due to the financial ruin the pandemic has left them in. Indeed, with the data revealing that 21% of small businesses expect to collapse before the changes in restrictions are even implemented, it appears that, for many SMEs, their fight for survival may already be over.
As the vaccination program continues to be implemented, some businesses are likely to be more impacted than those in other sectors. So, below, we run through the market ‘winners’ from the vaccine rollout.
Standing as one of the hardest-hit industries from the pandemic, the travel industry is likely to be one of the first sectors to bounce back from growing immunisation. Since the news of the vaccine was first announced late last year, national coach and tour operators witnessed a surge in bookings, especially from those aged over 65. National Express's coach holiday business reported that bookings made by those in this age group increased by 185% in January, and these figures were echoed by TUI, the UK's largest tour operator, who says that 50% of their bookings are currently made by over 50-year-olds.
However, domestic travel wasn't the only industry to pick up. Following the Moderna vaccine announcement, shares of British Airways owner International Airlines Group rose by 12.2%. This follows a 40% increase that came after Pfizer's announcement. However, with travel restrictions still very much in place, airlines are relying on the summer months to recover some of their losses. Both EasyJet and Ryanair only expect to fly 10% of their normal schedules for the first quarter of the year, which is a decrease from the 18% easyJet flew between October and December. So, if travel restrictions continue through the summer season, several UK businesses may be forced to raise more cash in order to survive.
Property and commercial real estate
Another sector that is likely to see gains from the vaccine rollout is property and commercial real estate. Much like the travel industry, this industry has been heavily impacted by the pandemic and the shift to remote working. However, now the vaccine programme is in full swing, there's greater hope that much of the UK workforce will soon return to physical office spaces - and this optimism is reflected in the recent rebounding share prices of the UK's largest office landlords, Land Securities and British Land.
This jump in property share prices isn't just taking place on home soil. The iShares Global REIT ETF, which tracks real estate stocks globally, has increased 9% since the vaccine's first announcement on the 6th of November. This growth in confidence is likely based on the presumption that, once normalcy is restored, occupiers and investors alike will be able to support the pick-up of real estate activity. However, until restrictions are lifted, office blocks are occupied, and consumer spending increases, it's likely that the property and real estate sector will remain in a period of uncertainty.
Hospitality and services
With various forms of regulations being placed on hospitality and service businesses since March of last year, business turnover in this industry has suffered dramatically as a result. Due to widespread closures and limitations on trading, the hospitality industry's profits fell by nearly £200 million every day in 2020, according to data from UK Hospitality (UKH). So, the government's plan out of lockdown undoubtedly comes as a welcome surprise to many working in the sector.
With outdoor and takeaway services opening as early as the 12th of April, and indoor premises set to open as early as the 21st of June, the UK's struggling hospitality and services industry is able to start regaining its footing for a busier year. Demand throughout the summer months is likely to surge, as the population becomes immunised and venues open, so many businesses will be able to pick themselves up from the worst year on record. However, while top-line revenues are still expected to rise in the near future, widespread unemployment and cash flow shortages may keep many operations in the red until at least 2022.
Unfortunately, not all industries are set to thrive once the vaccine has been rolled out. Since the vaccine was announced at the end of 2020, many tech companies saw their stocks tumble as a result. Before the Pfizer vaccine was announced, Netflix's stocks increased by 59.1%, and Amazon's stocks jumped by 79.2%. However, once the news emerged, Amazon's value fell by 5.1%, and Netflix decreased by 8.6%, and on this side of the pond, Ocado, London's online grocery retailer, lost 5.2%.
This sea-change in technology investment that took place following the vaccine breakthrough is likely to stem from fears that society will become less tech-focused as lockdown restrictions are lifted. However, while larger technology companies are unlikely to repeat the resounding successes of 2020, Rishi Sunak's Spring Budget provides hope to smaller tech SMEs, startups, and scaleups. As part of the Chancellor's efforts to 'back tech in a big way', he confirmed the launch of the Future Fund: Breakthrough, which is an investment scheme designed to support fast-growing tech startups, as well as the Help to Grow scheme, which is aimed at supporting digital integration in smaller businesses.
Whatever the completion of the vaccine programme may mean for your business, here are some precautionary steps all employers can take to prepare for the future:
Consider new working practices
As outlined in the back-to-office timeline, it's wise for business owners to consider changes to workplace practices long before businesses are due to re-open. Among many issues, this may include unvaccinated employees, anticipated timescales, new working requirements and different circumstances among group companies. To plan for these changes, it's recommended that employers conduct new risk assessments, to make the transition back into the workplace as smooth as possible.
Maintain safety measures
Despite the fast-paced and efficient nature of the vaccine programme, we're still a long way off from achieving widespread immunity. So, until the great majority of the workforce is immune to COVID-19, it's imperative that extensive safety measures remain in place. This should include coronavirus requirements such as social distancing, the regular and thorough cleaning of public and shared spaces, mandatory mask-wearing, and one way systems to limit physical contact. But additionally, businesses should also manage other health risks regarding fire safety, legionella safety, asbestos safety, COSHH safety, and manual handling safety, especially if the institution has been shut for an extended period of time.
For more information on how to mitigate COVID-19 safety risks, visit these guidelines from Thomson Recruiters, and for details on how to manage other safety risks, refer to this checklist from High-Speed Training.
Keep communication crystal clear
Another way to prepare for the future and to facilitate the smooth rollout of the vaccine amongst your team is to maintain a strong communications strategy. Disseminating clear and helpful information throughout your workforce is a simple and effective way to encourage participation in the programme while supporting employees who may have doubts. To do this successfully, your company should be prepared to answer questions, and should have sources of further information and support at hand. To ensure this information is useful and relevant, it's essential that your message aligns with up-to-date government guidance.