The economy shrank by 2 per cent in the first quarter (Q1) of 2020, as coronavirus forced the country into lockdown, with an even bigger slump expected in the current quarter. This represents the biggest contraction since the end of 2008.
Simon Hart, partner at RSM, comments on the latest GDP figures from the Office of National Statistics:
‘Despite the severity of the dip in GDP, the predicted 2.6 per cent dip did not materialise. Nonetheless, the scale of what business face over the coming months cannot be overstated. Companies have done much to scale back already, but a more extreme and protracted form of contraction and consolidation is likely in the short term. How passive, conservative or brave firms chose to be in the medium to long term will depend not only on the sectors in which they operate, how much of a resilient balance sheet and access to flexible working capital they have, but on their agility in the way that they prepare for future change.
‘The only way businesses can recover is by being adaptable. Over the rest of 2020 companies will need to ‘reactivate’ and ‘reimage’ their businesses. We all have to accept that we will never go fully back to working life as it was before and companies will need to answer questions such as: what new ways of operating exist and what sort of property space will be needed with changing work patterns?
‘Businesses will also need to evaluate what IT investment they need to be truly digital. Would they have been able to operate at even today’s reduced levels 10 years ago without, for example, video conferencing. Video calls are here to stay, so what do companies do to adapt this channel to work for them?
‘How long a recovery will take depends on whose crystal ball you look through. In many ways, it will depend on how long a globally available vaccine takes to be researched, developed and administered. Until then working practices will be curtailed and different and we won’t be able to define a successful economic recovery until mid-2021.