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Significant levels of concern voiced about the year ahead

Anne O'Dwyer, Duff & Phelps.

A new survey conducted by Duff & Phelps in partnership with Trade NI indicates over one third of businesses across the retail, hospitality and manufacturing sectors in Northern Ireland believe their trading and profitability levels will not return to pre-Covid-19 levels until 2022 or beyond.

Furthermore, over 50% of respondents indicated they are ‘concerned’ or ‘very concerned’ about their performance in the year ahead, with a further 29% saying they are ‘uncertain’.

The survey included members of Retail NI, Manufacturing NI and Hospitality Ulster and was conducted in September 2020, prior to the latest Covid-19 restrictions imposed across the province. The Business Recovery Survey reveals that almost half of respondents anticipate their employee headcount being lower this time next year, with around two-thirds claiming that their turnover will be lower.

When asked by how much their employee headcount will change by this time next year, one quarter 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, almost one quarter estimated 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’.

“It is clear that significant challenges will lie ahead for these businesses across what are among the sectors worst-hit by the coronavirus pandemic,” said Davy Elliott from Duff & Phelps, a leading provider of governance, risk and transparency solutions.

“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.”

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. Sixteen percent (16%) will endeavour to renegotiate their existing lease terms, while 15% will seek to refinance their business.

“We have been involved in a number of restructuring cases where we’ve completed an independent review of the value of a business and its assets,” said Elliott. “This has helped guide stakeholder assessment and decision making, particularly where multiple parties are involved, and brought the requisite level of independence and integrity to the process.”

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. Over two-thirds of businesses will call upon government grants or loans, with 51% also relying on employee retention support. Two-fifths will seek to defer HMRC payments, while one quarter 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 of businesses saying they will rely on the rates relief scheme in the coming year.

Glyn Roberts, Stephen Kelly and Colin Neill, chief executives of Trade NI, said in a joint statement: ‘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, said: “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.

“On our end, 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 businesses 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 is essential,” she said. “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.”

About the survey:

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

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