Happy New Year and best wishes for 2021 to all clients and friends of Drummond Laurie. Let’s hope that the year ahead helps us to forget the horrors and challenges that we all experienced over the last 12 months.
As we entered 2020, the biggest challenge of our generation was facing the UK economy in negotiating our exit from the EU, and hopefully agreeing a basis whereby we could continue to have tariff free access to the Single Market. The words COVID and Furlough were not yet part of our vocabulary and the idea that the Government would pay people to stay at home whilst most of the country was placed in “hibernation” would have been seen as fanciful. How quickly things changed early in 2020!
Very few of our clients would have been unaffected as the COVID pandemic took a firm hold on the country. Supply chains were tested, routes to market were restricted and in some instances closed, whilst even getting staff into the workplace was a challenge for long periods. The budgets set at the start of the year were very hastily being revised. The Government reacted extremely quickly with various support measures which undoubtedly helped to save many businesses and preserve employment for millions of workers.
As we now enter 2021, it’s sad to say that the position seems worse than ever with the new strain of the virus spreading rapidly and the country largely in a form of lockdown once again. The main Government support measure (the Furlough scheme) has been extended until the end of April, and it would be a brave pundit who would forecast that it will end then. However, there is a positive development, and it is a very big positive, in the shape of the various vaccines which were developed in record time and which are now beginning to be rolled out to the population at large. Our hopes now rest on the effectiveness of these vaccines and we should be thankful for the ingenuity of the scientists who have made this possible, many of whom are based here in the UK. We should also acknowledge the achievement of the Government in reaching a trade deal with the EU in a relatively short 11 month period, the more so as this was done with all of the COVID restrictions in place. When we consider that the EU trade deal with Canada, which is a small fraction of the size of the UK/EU deal, took 10 years to reach, it shows what is possible when there is a will and when deadlines are set and adhered to. Of course, to all importers and exporters the good news is that there will be no tariffs added to the prices of goods and services traded between both trading partners.
So how do we plan ahead for the year which lies in front of us? With so many unknowns, budget setting is an even more difficult task than it would normally be. Every business should be clear on what its fixed cost base is and, therefore, what its breakeven level of income is. Given the constraints in place in your sector, is it viable to achieve this breakeven level? Are there alternative income streams which you could access to supplement your core income? Are there opportunities to improve your working capital management through improved cash collections, more efficient stock holding, negotiating different terms with suppliers, etc? It’s likely that you will have had closer contact with your bank over the last 9 months and this should be maintained in the year ahead. Where there is the possibility that you may need to approach your bank for further support it is hugely beneficial if they are at least broadly familiar with your position, rather than starting from scratch when the “pressure is on”.
In the same vein, it is vital that your management information is both accurate and relevant as well as being available on a timely basis. As we have noted in previous messages, the management information which you produce is not a “box ticking” exercise; rather, it should be providing you with the data and KPI’s with which you base your decisions around. If your current management information is not providing you with what you require to make these crucial decisions please feel free to get in touch with your Drummond Laurie contact and they will advise you in this area. It is very likely that you will need to remain agile as the year unfolds, both in terms of business planning and continuing to access the Government support packages, and you can be assured that we will be on hand to assist in these areas whenever required along with all other business matters.
I’ve mentioned the Government support packages a couple of times in this message and we are all aware of the extent of this support. We should also be aware that at some stage in the future, this support will need to be paid for by the taxpayers. There has been much speculation in the media on what forms this will take and it is likely that the Chancellor will make this a bit clearer to us when he delivers his budget, hopefully in the spring time. We won’t speculate further here on what measures he may choose to take, however, when the time arrives we will be in touch again to explain what any changes in taxes are likely to mean to you and to your business.
In the meantime, everyone at Drummond Laurie wishes you, your families and your teams good health and happiness in the year ahead.