Unprecedented – it is the word of the moment. Rewind 12 months, few governments or businesses could have foreseen the events of 2020.
I am, of course, talking about the Covid-19 pandemic, which has unsettled global markets and sent shockwaves through all industries. Let alone overseeing the momentous task of moving whole workforces from offices to their homes, business leaders have also been forced to adapt their operations to ensure they can overcome the fallout.
Here is a question I have been toying with: how many UK startups, which are renowned for their ingenuity and adaptiveness, will be run out of business due to this crisis?
While the ultimate toll of the novel coronavirus is as yet unknown, the nation’s fledgling companies are already grappling with the disruptions to global supply chains and financial markets. There is no doubt that every business will be forced to contend with the knock-on effects of the global pandemic, but we must not lose sight of the innate ability of entrepreneurs to make the best of a bad situation.
That said, now more than ever we must rally behind small and early stage businesses across the UK to ensure that they are able to weather the storm. Notable steps have already been taken by policymakers to offer a lifeline to those who might otherwise fail to recover, but more must be done.
Indeed, I fear the initial schemes proposed fall short of requirements – evidence certainly shows that they have failed to calm the nerves of our startups.
What we can learn from recent research
At the end of March 2020, Studio Graphene surveyed over 100 UK tech startups to better understand how they are coping in the current climate. It is the fifth time we have run our quarterly Tech Tracker Survey, giving us unique insight into how confidence levels have fluctuated.
It is difficult to ignore how quickly the pandemic has rattled confidence; over a third (38 per cent) of UK tech startups said they are either ‘not confident’ or ‘not confident at all’ that their turnover will grow in the year ahead. This is up from a mere 4 per cent who said the same thing 12 months before.
When quizzed about their ambitions for the coming year, many appear to have put their plans on hold until the worst of the pandemic is over. Notably, over two fifths (42 per cent) of tech businesses said they do not intend to hire more staff, which marks an increase of 33 per cent from this time last year.
Elsewhere, the survey revealed that more than a third (35 per cent) of UK tech firms do not feel they are well prepared to withstand the potential fallout from Covid-19; a similar number (31 per cent) have not made contingency plans to see them through the storm; and a whopping 69 per cent lack faith in the Government’s ability to support UK tech companies in these difficult times.
Action is required, and fast.
There is hope yet
We cannot dismiss the UK Government’s efforts to lend a helping hand to the nation’s SMEs and protect their cashflow. Measures such as the Coronavirus Business Interruption Loan Scheme (CBILS), which was originally announced in the 11th March Budget before being reformed to offer more comprehensive support, will go a long way in giving businesses a financial security blanket. So too will the overhaul of business rates and the promise to pay the wages of staff who have been furloughed.
That said, many businesses are still falling between the cracks, and the Government must bring in urgent reforms to these schemes to stop small businesses from going bust. For example, companies who are operating at a loss while they invest in their product before scaling do not currently fall within the remit of the CBILS. This is a characteristic of many startups.
At the same time, concerns have been raised about the slow rate of approval for loans to help firms hit by lockdown measures. Indeed, just 21 per cent of CBILS applications have been successful; we must find ways to ensure this number increases.
Once support schemes have been bolstered, UK startups will have the means to pivot their business models and adapt to the current climate – if not to grow their business, but simply to survive the challenging situation. And as we have already been seeing, leveraging technology will help companies stay afloat and perhaps even carve out new opportunities.
The lack of footfall in pubs and bars means that breweries are delivering their beers straight to their consumers’ doors. Gyms and yoga studios are offering online training sessions while their clients remain at home. Meanwhile, other businesses have diverted their efforts to help tackle the spread of coronavirus; HealthTech startups have risen to the challenge by creating tracker apps that will not only support the NHS, but will also give consumers a better understanding of the symptoms and effects of Covid-19.
These are just a handful of the many examples of extraordinary ways that businesses are adapting to the crisis. While the effects of the pandemic will be felt by industries worldwide for months to come, utilising technology gives us the best possible chance of coming out on the other side with the least amount of damage caused.
Ritam Gandhi, founder and director, Studio Graphene