How the UK's small and mid-sized businesses adapted to the pandemic

27 May 2021 Consultancy.uk 3 min. read
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The Covid-19 pandemic has forced small and mid-sized businesses SMBs to adapt to new working conditions. Having been hit hardest by the crisis, however, small businesses in particular have been the slowest to respond to challenges facing the market.

Throughout the last year, the global economy has been rocked by the on-going coronavirus outbreak. While the impact of the crisis on the world’s largest businesses has been widely publicised, however, small and mid-sized businesses (SMBs) have had to overcome arguably even greater barriers to survive the recession.

According to a new study by Analysys Mason, the crisis has prompted many SMBs to radically alter their organisational models since the start of 2020. They have proactively adopted new technologies to connect and secure their remote workforces, while reallocating budgets to boost their liquidity. In the long-term, however, some have been quicker to adapt than others – and in the post-pandemic recovery, this could continue to haunt the SMBs who have been reluctant to change.

Revenue change between 2019 and 2020, by business size UK

Analysys Mason interviewed 465 SMBs in the UK between December 2020 and February 2021 to understand how they have managed the crisis, and to learn about their post-Covid-19 plans. As would be expected, the pandemic caused significant financial disruption to the companies surveyed in 2021’s first quarter, with 48% reporting a decline in revenue compared with 2019. What the study also found, though, was that the impact of the pandemic on financial performance was especially challenging for the smallest businesses polled.  

Revenue fell for 52% of small businesses (SBs) of between 0-99 employees, compared to only 40% of mid-sized businesses (MBs) of 100-999 staff. Meanwhile, 43% of MBs even managed to grow revenue – in contrast to less than one-third of SB respondents.

There are a number of reasons why this might be, for instance, MBs often have a more widely-known reputation than SBs, which can help to retain or win clients during times of crisis. However, Analysys Mason also points toward the fact MBs seem more comfortable rapidly transforming their operations to adapt to new challenges. Around 41% of MBs started work from home for employees during the pandemic – almost double the portion of SBs – while many MBs reportedly went a step further “by changing the ways that they delivered products and services to their customers,” including the roll-out of home delivery services, touchless payment options and curb-side pickups.

Steps taken by SMBs to respond to COVID-19, by business size, UK, 1Q 2021

The researchers stated, “Many UK businesses have adopted new technology solutions or increased their usage of existing solutions to facilitate remote working. While there was a surge in adoption and usage of all IT solutions, new user adoption of collaboration solutions increased the most, at 39%. Many SMBs anticipate similar or increased spending on some of the solutions that they have recently adopted, which represents a significant market opportunity for vendors.”

With the pandemic having potentially made long-term changes to consumer behaviour across the UK, these adaptations may not only prove crucial to surviving during the lockdown months, but pivotal in thriving beyond them. For example, many customers will likely remain hesitant to return to public places – particularly to purchase goods which are now readily available online. This means that while many small and medium businesses did resort to cutting costs, the fact that more MBs committed toward organisational adaptation may better position them to reap the rewards in the coming months.

Nearly half of all of the MBs surveyed chose to adapt while also cutting costs, whereas more SBs chose only to cut costs or to take no action. According to Analysys Mason, a significant percentage of 48% of SBs meanwhile either opted to cut costs or chose to take no action at all in response to the pandemic.