Has Covid-19 changed the way businesses behave forever?

Nic Redfern, finance director of NerdWallet

It would be foolish to suggest that, as we begin to look towards a fully reopened society, any two businesses will respond in the same way. Indeed, as the worst of the COVID-19 pandemic begins to abate, with social distancing measures gradually loosening, business leaders will reflect on their broadly divergent circumstances and take entirely separate lessons from their operations over the past year.

This is natural; when looking to assess how the pandemic may have altered business behaviours, decision-makers will observe that the unexpected nature and rapid onset of Covid-19 will have struck each business differently. However, there are several indicators that may be useful in establishing the return to normal trading.

For instance, business investment. Despite increased business confidence over the past months of lighter restrictions, ONS figures highlight a major investment shortfall in relation to pre-pandemic levels. While in Q3 2020 the volume of investment made by businesses rebounded strongly (9.4%) from the understandable crash in Q2, the latest figures show that Q1 2021 was still 18.4% down on the last quarter of wholly pre-pandemic trading. While some firms have been able to continue investing in growth, it is clear that there has been a broad tightening of belts across sectors, with ‘survival’-based operations taking precedence over scale and diversification.

 

The end of bricks and mortar?

It must be noted that the pandemic has likely changed perceptions and expectations around working life. As employees were forced to abandon office spaces and adjust to remote working environments, many enjoyed the flexibility this change afforded. A recent study found that 85% of employees now want to continue remote working even after the pandemic. Accordingly, businesses will weigh up whether working from home could be viable in the long run.

In the past, offices were much-maligned by management and employees alike. Renting an office space brings with it substantial costs, both initial and ongoing. Beyond the rent costs, there are factors such as furnishing, utilities, and cleaning to consider, all before reviewing ‘soft’ factors such as transport links and accessibility which may render the space less efficient when considered against the resources needed to sustain it. These costs are often prohibitive for startups and scaleups with little to invest beyond their business-critical core operations. A study of UK small and medium enterprises (SMEs) found that 70% were making a monthly cost saving of up to £840 per month through eschewing the office for remote working during the pandemic. It goes without saying that this sum could be productively invested elsewhere in most small businesses.

 

Continuing to work remotely

However, while a suitable alternative for many, remote working has its downsides. While communication issues and productivity slumps will have been broadly ironed out by more than a years’ experience navigating the challenges, businesses will also be aware of the costs in this area. These range from providing employees with the furniture and technology required to ensure their working environment is both comfortable and productive, to the heftier sum required for the necessary technological and cybersecurity software overhauls needed once workers adapt to network-based working.

Overlooking this expense will prove even costlier; as data breaches to UK companies cost, on average, £2.48 million per instance. Such costs could be a factor in persuading decision-makers to return, as soon as possible, to working from the office – though it is certain many will continue on with remote or hybrid working models.

The return to normality should not necessarily mean “business as usual”. When assessing the impact of the past year on business in the UK, it is highly unlikely we will gather a clear picture in the months, or perhaps even years, to come. Some firms have weathered the storm ably, adapted rapidly, and taken advantage of emerging market opportunities instigated by the pandemic – many will feel they are in a better position now than pre-pandemic.

 

Conversely, the broader experience will have been streamlining, concentrating resources on core operations, and risk-aversion. Emerging from the pandemic into a revitalised business landscape with renewed confidence and growth-seeking behaviour. However, it is advisable that firms of any scale pay careful consideration to the impact of the pandemic, and where they succeeded or failed in addressing them.

 

Nic Redfern is the finance director for NerdWallet UK. NerdWallet is on a mission to provide clarity for all of life’s financial decisions. As an independent financial comparison website, NerdWallet provides consumers and businesses with useful tools and insights so they can make smart money moves. From choosing a bank account or breakdown cover to buying a house, NerdWallet is there to help individuals make financial decisions with confidence. Users have free access to our comparison tables and expert content, to help them stay on top of their finances and save time and money, giving them the freedom to do more. For more information, visit NerdWallet.com/uk/.