It generally takes a fall in GDP over two successive quarters for an economy to be classed as in recession.  The UK has “only” been in lockdown since March 23rd, but it’s probably safe to say that it’s going to take at least two quarters for its economy to start to recover from the damage which has been done already – and we’re not out of lockdown yet.  At the same time, it’s not all bad news, in fact, some businesses are showing impressive resilience and a few are even going for growth.

Adapting to survive

Some businesses need workers and/or customers to be on-site so they can carry out their main activity.  This is particularly true in service industries such as leisure and hospitality, health and wellness and beauty.  These industries have, unsurprisingly, been hit particularly hard by the lockdown.

Necessity, however, is the mother of invention and with the internet very much still in business, individuals and companies in the service sector have increasingly been looking for ways to rework their business model so they can generate at least some income online.  Some are offering tutorials or leading online classes, others are selling digital products such as recipes, others are selling physical products related to their niche, either directly or as an affiliate.

Strengthening networks

Possibly one of the most interesting aspects of the COVID19 pandemic is seeing the mechanics of the supply chain laid bare, giving a (hopefully) once-in-a-lifetime opportunity to watch the dynamics between suppliers and their customers.  These might not be at all what the average person (or even industry experts) might have predicted.

For example, even though “fast-fashion” retailer Primark has an estimated £1.5 billion of stock in limbo, it has committed to purchasing all items which were either in production or finished and planned for handover up to a cutoff date of 17th April.  That’s about £370m worth of stock.  Primark has also said it will seek to assist suppliers who need to open new lines of credit.

Marks & Spencer, by contrast, has cancelled around £100 million of orders, which appear to be mostly from its clothing and homeware lines.  This is even though, unlike Primark, M&S also sells food.  This enables it to keep at least some of its stores open and hence provides at least an opportunity to sell additional items.

It’s still too early to see how these different courses of action will play out, but it seems fair to assume that suppliers are likely to have massively more goodwill towards Primark than to M&S and perhaps regular customers will too.

Going for growth

Some companies are even seeing the current situation as an opportunity to go for growth.  The most obvious example of this is the logistics industry, where business is brisk, to put it mildly.  We’re expanding our operations to cope with the demand and anticipate that the additional capacity will very much still be required when lockdown ends.

There are many reasons for this, but the most obvious is that the COVID19 pandemic is likely to lead to long-term or even permanent changes in consumer behaviour.  This fact has clearly been spotted by some retailers, which have been investing heavily in their infrastructure even though the lockdown is likely to have taken a chunk out of their profits.

Based on publicly-available information, much of the activity seems to revolve around logistics.  For example, Sainsbury’s is working on using artificial intelligence to improve its supply chain and fashion retailer Boo Hoo is working on improving its use of automation.  These retailers, and other companies which are following their example, are setting themselves up to move quickly ahead as economic normality returns, which it will, even if it takes a while.

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