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BUSINESS RECOVERY SURVEY SHOWS SIGNIFICANT LEVELS OF CONCERN ABOUT THE YEAR AHEAD

A new survey has shown that 50% of businesses across the retail, hospitality and manufacturing sectors in Northern Ireland are ‘concerned’ or ‘very concerned’ about their performance in the year ahead, with a further 29% saying they are ‘uncertain’.  Over one third of respondents (35%) believe that their trading and profitability levels will not return to pre-COVID-19 levels ‘until 2022 or beyond’.

The survey was conducted by global advisory firm Duff & Phelps in partnership with Trade NI, encompassing members of Retail NI, Manufacturing NI and Hospitality Ulster in September, prior to the latest COVID-19 restrictions being imposed across the province. The ‘Business Recovery Survey’ reveals that almost half (48%) of respondents anticipate their employee headcount being lower this time next year, with around two thirds (65%) claiming that their turnover will be lower. 

When asked how their employee headcount will have changed by this time next year, one quarter (25%) of businesses predicted that it would be ‘up to 25% lower’, with 17% saying ‘up to 50% lower’ and 6% saying ‘more than 50%’ lower. Only 9% of respondents said their headcount would be higher, with 44% saying it would be ‘similar’.

Just 12% of respondents predicted that their turnover would be higher this time next year, meanwhile, with almost one quarter (23%) estimating that it would remain ‘similar’. Of those suggesting that their turnover would reduce over the coming year, 26% said it would be ‘up to 25% lower’, whilst 25% said it would be ‘up to 50%’ lower and 12% claimed it would be ‘more than 50% lower’.

With over one third of respondents (35%) believe that their trading and profitability levels will not return to pre-COVID-19 levels ‘until 2022 or beyond’, 30% expect to see a return to those levels in the first or second half of 2021. Only 5% expect their trading and profitability levels to recover by the end of 2020.

Commenting on the results, Davy Elliott, Senior Advisor at Duff & Phelps said: “It is clear that significant challenges will lie ahead for these businesses across what are among the worst-hit sectors by the coronavirus pandemic. Whilst these results are concerning, it is encouraging to note that respondents are proactively taking steps to protect their businesses and boost recovery efforts in the coming year and beyond.”

“Our experienced valuation professionals are seeing a number of restructuring cases where an independent view on enterprise or ‘business and assets’ value is key to stakeholders’ assessment. This can be to help establish where the value breaks in the capital structure are or adding a vital layer of insurance and reliance,  particularly where a sale may be executed via a ‘pre-pack’ insolvency procedure. An independent review on valuation has been a critical tool guiding decisions where multiple stakeholders are involved and brings the requisite level of independence and integrity to the process.”

While 40% of respondents said they will consider restructuring their business in the next 12 months, 27% said they intend on repurposing or diversifying their product line. 16% will endeavour to renegotiate their existing lease terms, while 15% will seek to refinance their business. 

The survey respondents also identified a range of support initiatives they will rely on to help their businesses recover from COVID-19 in the coming year. 69% of businesses will call upon government grants or loans, with 51% also relying on employee retention support. Two fifths (41%) will seek to defer HMRC payments, while one quarter (26%) will seek new or additional bank lending and 37% will focus on marketing and promotional development activity.

The overwhelming response came in relation to rates, with three quarters (75%) of businesses saying they will rely on the rates relief scheme in the coming year.

The Chief Executives of Trade NI, Glyn Roberts, Stephen Kelly and Colin Neill said:

“What comes across very clear from the survey of our respective memberships is the vital importance of the rates holiday and the need to extend it further from April 2021. If our economy is to stand any chance of recovery, further rates relief will be needed throughout next year to support our members as we rebuild our shattered economy”

Anne O’Dwyer, Managing Director and Co-Head of Duff & Phelps Ireland commented: “The survey findings are consistent with what we’ve been seeing in the market over the last six months, whereby businesses have been looking to avail of government support packages to help navigate COVID-19-related financial challenges. We have been assisting clients with landlord/tenant lease negotiations, refinancing debt terms with borrowers, working capital management, and seeking funding support.”  

There are steps that business across the retail, hospitality and manufacturing sectors can take in the coming months.

“Whilst it is challenging to accurately forecast trade over the short to medium term given the current flux in the market, having a clear picture of expected cash flows over the short to medium term is essential. Trading projections can be flexed as the environment changes but highlighting potential funding gaps or cash constraints will assist businesses as they look to negotiate with stakeholders or apply for additional funding supports.” she said.

ENDS

 

About the survey:

  • The survey was conducted online in September 2020
  • Members of Hospitality NI, Retail NI and Manufacturing NI were invited to respond
  • 323 businesses responded

 

About Duff & Phelps:

Duff & Phelps is the world’s premier provider of governance, risk and transparency solutions. We work with clients across diverse sectors in the areas of valuation, corporate finance, disputes and investigations, cyber security, claims administration and regulatory compliance. With Kroll, the leading global provider of risk solutions, and Prime Clerk, the leader in complex business services and claims administration, our firm has nearly 4,000 professionals in 25 countries around the world. For more information, visit www.duffandphelps.ie.

M&A advisory, capital raising and secondary market advisory services in the United States are provided by Duff & Phelps Securities, LLC. Member FINRA/SIPC. Pagemill Partners is a Division of Duff & Phelps Securities, LLC. M&A advisory, capital raising and secondary market advisory services in the United Kingdom are provided by Duff & Phelps Securities Ltd. (DPSL), which is authorized and regulated by the Financial Conduct Authority. Valuation Advisory Services in India are provided by Duff & Phelps India Private Limited under a category 1 merchant banker license issued by the Securities and Exchange Board.