The chairman of 4icg Group, a marketing data specialist based in Glasgow, tells Director about the key challenges facing his firm and evaluates the government’s response to the pandemic so far
How serious is the situation and how is your company dealing with it?
This pandemic is by far the biggest economic threat we have seen in modern times. It’s possible that the whole economy will go into isolation. The whole of the capitalist world survives on the basis of a circular economy: when everyone stops moving, the economy stops moving.
A decent part of our work is securing business for large tech organisations around the world, including most of Europe. Our business in Italy hasn’t merely plummeted; it has ceased.
Our number-one priority is to protect our staff. To this end, we have substituted physical business-development meetings with virtual ones. Fortunately, our customers are some of the biggest tech companies in the world, so they will survive. But businesses in their supply chain are under threat.
One thing you don’t have in a high-growth business is a big stash of cash. Every penny goes into growing the business, which leaves a very short cash runway. We therefore have to manage what we do have on a day-to-day basis.
How do you rate the government’s response so far?
This is a health crisis first and foremost, so managing that has to be the priority. As a cancer survivor, I appreciate all too well the wonderful job the NHS does – I simply wouldn’t be here without it. I hope to come out at the end of this crisis alive too.
But I am also a businessman, so I want to ensure that there’s something left for us all to come out to at the other end. When Rushi Sunak announced the measures last Friday I could almost hear the gasps of businesspeople. The £330 billion of support he pledged for British businesses was truly remarkable.
That said, I have since contacted well over 100 businesses that have spoken to their banks about the coronavirus business interruption loan scheme (CBILS). Every one of them has told me that they’ve had a poor response, which can generally be summarised in four statements:
- “This is too early to even consider, as we know very little about how the scheme will work.”
- “The application process will take several weeks.”
- “You should provide medium- to long-term forecasts showing the ongoing viability of your business.”
- “We will need personal guarantees for the 20 per cent not guaranteed by the government.”
The government is guaranteeing 80 per cent of any CBILS loan, which makes it look as though the banks are taking a 20 per cent risk on what they’ll lend. But the 80 per cent guarantee kicks only in if the bank has exhausted all routes to recover the money. Otherwise, the bank is 100 per cent liable. Every CBILS loan will therefore be risk-assessed by a bank’s credit committee – and we’ve all experienced how long that takes.
These statements do not reassure businesses. Our current dilemma is urgent, so giving firms a solution that is several weeks away is of no use whatsoever. We all find it hard to predict how long this pandemic will last, so forecasts are meaningless.
Lastly, business owners are being asked to sign up for personal guarantees and effectively put their livelihoods on the line when at any time a law could be introduced that prevents them from trading. They are without doubt caught between a rock and a hard place.
What is the toughest challenge you expect to face in the short to medium term?
Cash flow and uncertainty will be our biggest challenges over the next few weeks. Do we furlough some staff now and cash flow them until the money can come through? Do we hope that a CBILS application is accepted to see us through the cash shortfall? Will we be able to trade if the health situation worsens?
What other measures would you like the government to introduce?
Communication is the key right now. Too many people rely on what they heard that morning in the media or what one of their friends or peer group has heard.
I believe that a government-backed education programme providing one source of regular information that directors can rely on should already have been mobilised. This programme would advise not only on best practice with respect to employees but also on survival mechanisms when staff are sick and/or the business goes off the edge of a cliff.