Coronavirus: What it means for UK businesses
At present, it’s difficult to quantify the extent of the economic impact that coronavirus has had on businesses.
However, over the last few days, the performance of some stocks have dramatically worsened. This is cause for significant concern, as there is the chance of further disruption occurring should there be a widespread outbreak in the UK.
With China being of such high economic importance, businesses are already feeling the strain from the country’s shut down, including:
- Reduced supply of steel and other metals coming out of China, which is impacting the automotive sector particularly, and its associated supply chains.
- Reduced component supply into manufacturing.
- Reduced white goods supply into UK distribution networks.
- Specific impacts within travel and tourism – home and abroad.
- Reduced footfall and expenditure in key tourist destinations.
All of the above are creating issues in fulfilling contractual obligations, in turn impacting on short term cash flow and, more fundamentally, business models in the medium term. Should significant outbreaks occur in other key importing countries, these problems will grow in intensity, causing UK manufacturing and the supply chain to take a huge hit.
If more cases are reported in the UK, then there will likely be direct impacts on the day-to-day operation of many UK businesses, undoubtedly impacting their viability in an uncertain economic climate.
It is a difficult message to externalise without being seen as alarmist, but it is always better to put plans in place for the worst-case scenario before it happens. For businesses that already have contingency plans available, now is the time to implement them to ensure the impact on the supply chain and cash flow is as minimal as possible.
Should businesses not have an alternative plan to follow, they should start to have conversations with any clients that rely on imported products to function. This allows any vulnerabilities to be identified and gives time for mitigation action to be taken. If the outbreaks begin to get much closer to home, then that conversation needs to widen, looking at local suppliers and how they could be impacted.
Recently, coronavirus has dominated global headlines, and rightly so. The disruption it could cause to supply chains and businesses has the potential to be hugely damaging, both now and into the future. In such an uncertain climate, it is recommended to seek advice from a professional, such as our corporate restructuring team. That way, organisations can take the approach that best suits them and their clients, reducing the risk of supply chain collapse.
For more information, please contact Andy Taylor on 0121 631 5326 or another member of the restructuring, recoveries & insolvency team in your local office. For advice or guidance on any other legal issue, a member of our team can help – please click here to discuss.