By Ritam Gandhi, CEO and Founder, Studio Graphene
Businesses in the UK, and indeed around the world, are currently grappling with what is, in all likelihood, the biggest challenge they have ever faced. The ongoing coronavirus pandemic has upended the operations of companies large and small, and there is still little understanding of when we can return to business-as-usual.
From disrupted supply chains to a drop in demand for goods and services, business leaders have been forced to adapt. And while the outlook looks uninspiring if not downright gloomy, we must remember the way that UK startups have responded to adversity in the past.
Take the 2008 financial crisis as a case in point. The economic repercussions were felt by all businesses, with many ultimately being pushed to the brink. However, the crash also inspired new ventures as innovative entrepreneurs worked to turn the tables and make the most of a bad situation.
Old business models were disrupted, paving the way for people to find new revenue streams and offerings. In fact, data suggests that it may have even inspired a new wave of entrepreneurs; according to Companies House, the number of new businesses set up in the UK has risen every year since 2008.
While the 2008 financial crisis does not offer a direct comparison to today’s climate, it offers hope that our businesses will be able to weather the storm.
To do so, however, they need support in the short-term. Small businesses are the backbone of the UK economy, and we must protect them during these uncertain times if we want to remain a booming nation of startups.
What we can learn from the numbers
In March 2020, when businesses were coming to terms with the new reality – which, for many, involved shifting their operations to the remit of their employees’ homes and finding new ways to sell their goods and services – Studio Graphene conducted a survey to unveil how tech firms were coping.
Over 100 UK tech startups were surveyed, with the results offering an understanding of confidence levels and what impact the pandemic has had.
One observation that stands out is how quickly and dramatically confidence levels have dropped since this time last year. Over a third (38%) of UK tech startups said they are either ‘not confident’ or ‘not confident at all’ that their business’ turnover will grow in the year ahead. This is up from a mere 4% who said the same thing when we asked them 12 months before.
Turning to their plans for the coming year, many appear to be holding back on their ambitions while the effects of the coronavirus are realised.
Two fifths (42%) of businesses do not intend to hire more staff, which marks an annual increase of 33%. Meanwhile, four in ten businesses have no plans of raising investment in the next 12 months, and half (51%) do not plan to expand into new territories.
The lack of faith in the Government’s ability to support them through these testing times should also serve as a red flag: over two-thirds (69%) of businesses lack confidence in its ability to help them through the COVID-19 pandemic.
Can startups recover?
Entrepreneurs are notoriously resilient, and those with the right tools and mindset are already taking advantage of the current climate. Without cohesive support measures from the Government, however, many will be unable to turn the tide in their favour.
We must give credit where credit is due, and the Government has been quick to offer financial breathing space to the private sector. That said, many of these measures have been criticised for failing to reach those who need it the most. Loss-making startups, for instance, are not covered by the Coronavirus Business Interruption Loan Scheme (CBILS), which initially left them vulnerable.
It is positive to see that the Chancellor has recently unveiled measures to remedy this shortcoming, with plans to use venture capital funds and further loan guarantees to channel cash to businesses.
Now, the Government must work hard to ensure that the loans which have been offered through the new Future Fund (announced on 20 April) can actually be utilised; to date, lenders have been criticised for being slow to approve requests due to excessive red tape.
Businesses are adapting
With the right provisions in place to help them get through the worst of the pandemic, I have every faith that startups will be well-placed to survive. Indeed, we are already seeing positive signs that businesses are adapting.
Many startups are launching new, tech-focused products and services to adjust to the new conditions and continue to safeguard their core proposition – albeit, perhaps, in a different form.
We are seeing small companies leverage technology to adjust the way they operate. For instance, businesses have already pivoted their models to generate novel solutions to the problems they face, and even use their skill and resources to help coronavirus efforts.
Digital health startups, for one, have risen to the challenge by creating apps to monitor, and thereby reduce, the spread of the virus. Tracker apps have been developed and made available to both support the national health system and give consumers a better understanding of the symptoms and effects of COVID-19.
Meanwhile, platforms that would normally be helping food producers get their produce to bars, cafés and restaurants, are using their platforms to enable these products to reach consumers instead – particularly vulnerable groups who may struggle to source food from their local shops.
And while physical distance initially posed a considerable obstacle to businesses who rely on face-to-face interactions, we are seeing gyms and music venues live streaming online sessions to reach audiences
who are now effectively home-bound.
Through software solutions, businesses can pivot their business models and find novel ways of delivering their services. However, the dreams of ambitious business leaders cannot be realised without the helping hand of the Government. That is why it is more important than ever before to bolster support for the country’s businesses and unleash their potential.