UK business leaders more negative than EU counterparts

Covid-19’s unprecedented disruption to the financial coffers of European businesses has come at a time when Britain was already facing seismic geo-political changes, and this seems to have caused British businesses to take a more reserved position on what the recovery will look like. Business leaders in the UK are more negative about the post-coronavirus economic outlook than those across Europe, according to a new study.

From the very onset of the current pandemic, looking at previous similar outbreaks, the speed of transmission, Covid-19’s subsequent scale and it’s larger mortality rate, it was apparent that it was not an event markets would easily shrug off. Indeed, as the global economy has become increasingly dependent on unfettered movement, the sudden lock-down many of the world’s leading markets entered into earlier in 2020 have led to major financial disruption.

According to a recent study of some 300 business leaders based in Europe, this has seen the vast majority negatively impacted by the Covid-19 crisis. The survey, conducted by consulting partnership Eden McCallum, found that across the full dataset, 76% of business leaders reported a negative impact on their company to date, including 33% who forecast a ‘very negative’ impact. Meanwhile, 85% of those polled expect the impact to be negative over the next 6 months, with 29% preparing for a ‘very negative’ downturn.

Commenting on the survey’s findings, Sara Ghazi-Tabatabai from Eden McCallum said, “The shutdowns have given business leaders little choice but to take preventative action to save their businesses and prepare for recovery, whenever it comes.”

With the UK already navigating a complex period of geo-political and economic turmoil thanks to the protracted Brexit process, however, it is perhaps not a huge surprise that business leaders in Britain are more downcast than most about their future prospects. Eden McCallum found that while no respondents in the rest of Europe said they felt the situation would never get ‘back to normal’, at least 2% of British respondents said they feared just that.

At the same time, just 2% of UK business leaders felt the situation would be resolved in the next three months – and while admittedly that does seem unlikely, it also pales in comparison to the 7% of Dutch businesses who said the same thing. Meanwhile, 44% of UK respondents said business would take longer than 9 months to recover – if it recovered at all – contrasting drastically with the rest of Europe, where 30% of respondents said the same.

As a result of this particularly gloomy outlook, the UK’s businesses also seem to have taken the most drastic measures in response to the coronavirus downturn. Of those surveyed, 80% of UK business leaders said they had frozen new hiring and 75% had reduced contractors – compared to much lower rates across the rest of the continent.

Strikingly, while 67% of bosses had made use of the UK Government’s furlough scheme (where the state pays the bulk of an employee’s wages to offset job losses), a huge 36% said they had still reduced pay at their firm, and 16% had made staff redundant. In contrast, only 7% of business leaders in the rest of Europe reduced pay, while even fewer had made staff redundant.

One reason UK businesses have taken the most stringent precautions so quickly is that they expect to have significantly worse falls in revenue in 2020 than those in other nations. For example, the majority of respondents across Europe said they expect to see falls of under 20%. Stand-out figures included 15% of Dutch businesses expecting little to no impact at all, and 18% of the rest of the continent expecting to increase their revenues. In the UK, on the other hand, only 30% of business leaders though the revenue fall would be under 20%, while one-in-ten respondents said they expected a fall greater than 70%.