British Firms Imperilled by Virus Look to Budget for Help

(Bloomberg) -- For William Butler-Adams, managing director of London-based folding bike manufacturer Brompton Bicycle Ltd., the global coronavirus pandemic has been a nightmare.

Brompton failed to sell a single bike from their offices in Beijing and Shanghai for two months. Then, just as business started to pick up again in China, their German battery supplier could not source three key components, with Brompton only able to find alternatives after much searching and at triple the cost.

While the disease itself has yet to ravage the U.K., British businesses are already suffering -- and many fear their situation will become impossible if the worst happens. Schools could be closed and as much as one fifth of the nation’s workers could be off.

On Wednesday, the Bank of England announced an emergency interest-rate cut and introduced a new program aimed at ensuring businesses at risk of being hurt by the virus can access credit easily and cheaply.

Butler-Adams wants Boris Johnson’s government to follow suit and act to shield companies from the greatest threat to the economy in a decade.

“If we lock down schools, companies should be subsidized to support their staff to look after their children,” he said. “We can’t afford a situation where we’re paying for our staff to not come to work for a month. That’s beyond what is reasonable.”

For many businesses, the government’s budget on Wednesday holds the keys to their survival, whether that be relief from business rates, short-term financing aid or emergency childcare support. Less than a month into the job, Chancellor of the Exchequer Rishi Sunak has had to rapidly pivot from delivering Johnson’s victorious electoral manifesto to fighting a global pandemic which has shut down countries and infected over 110,000 people.

Plan B

“If we can’t sell bikes we’re going to have to adjust our plans, our capital investment, everything,” said Butler-Adams. He’s preparing a ‘Plan B’ for a worst-case scenario, which will see the company cancel moves to open stores in San Francisco and Paris and hire an additional 50 people.

The global coronavirus pandemic is hitting small businesses in the U.K. by disrupting supply chains and encouraging both customers and employees to stay at home. Across Europe countries are stepping up precautions: Italy has restricted travel out of the country, Ireland has scrapped its St. Patrick Day’s celebrations and schools have closed in Madrid. In comparison, the U.K.’s response has been muted, with Johnson urging the public largely to continue as usual and wash their hands.

That could be set to change soon, as Chief Medical Officer Chris Whitty said on Tuesday that people with respiratory conditions might be asked to start self-isolating in the next two weeks.

“Clearly the Chancellor will need to ready measures at Wednesday’s Budget aimed at supporting small firms and the self-employed should the situation escalate,” said Mike Cherry, national chairman of the Federation of Small Businesses. “Targeted interventions for small firms involved in international supply chains that are struggling with cashflow will probably be needed very soon,” he said.

Consumer Jitters

Global markets sounded the alarm on Monday when Saudi Arabia and Russia shattered their alliance and started a race to the bottom on oil prices. Later that same day, the Italian premier effectively shut down national borders. European equities cratered and Wall Street trading was temporarily suspended to keep the stock market from collapsing. In the heart of the City of London’s financial center, Shamim Rahman wondered where all his customers had gone.

Opening his Curry Leaf restaurant at midday, he waited for City workers who usually streamed in for lunch. But they never arrived. “I had 30 customers -- that’s nothing, I normally get 100 customers. If I don’t get at least 70 every day for the next week, I’ll be in trouble.”

By the evening, when some were already calling the day ‘Black Monday,’ the price of Rahman’s food stock had already gone up. “I’ve been in the business since 1986, we’ve seen ups and downs with recessions,” said Rahman. “But nothing that’s affected us this much.”

During the last recession in 2008, Rahman remembers the government’s decision to cut Value Added Tax as one of the measures which saved his restaurant. Since then, in the last three years he’s seen his business rates double. “The main way the government can help us is to reduce those rates,” he said.

Sunak has vowed to small firms that the budget will support them through the worst of the crisis. Potential gifts to businesses including expanding discounts on business rates to small retailers, and making it easier for those hit by supply chain troubles to access financing.

Brexit Stockpiles

Brexit, the dominant concern for British business in recent years, has unexpectedly saved the day for several companies, who stockpiled orders in expectation of friction following the U.K.’s departure from the European Union. Brompton’s Butler-Adams invested one million pounds in such supplies, which have helped him weather the storm from the coronavirus. Yet he’d far rather see lingering Brexit uncertainty than what he faces now.

“Brexit is just a big flap about very little whereas this is really something to worry about,” he said. “It’s real.”

For fitness nutrition company Bio-Synergy, it’s a problem of demand, not supply. Their customers in Asia have “effectively got all orders on hold” for the quarter, said founder Daniel Herman. The same has happened in Italy, and he fears the trend may replicate across Europe as the virus spreads, crushing consumer demand and upping small businesses need for government support.

“People are just not going out, not going to the gym and are concerned about catching it,” he said in an interview. “If there were some kind of short-term support, low interest or zero interest loans, until business starts flowing again, that would be helpful.”

The Federation of Small Businesses has a list of demands for the government to help, including temporaily cutting VAT and following Japan’s example by making interest-free loans available to small firms.

With 373 cases and six deaths in the U.K. by the latest count, businesses are aware that they haven’t yet seen the worst.

“It’s a big problem for us, huge: we need government support,” said David Keyte, founder of Universal Works, a Nottingham-based maker of stylish suede jackets and cardigans, with 38 stockists in Italy. “Fear is gripping everything right now.”

To contact the reporters on this story: Greg Ritchie in London at gritchie10@bloomberg.net;Olivia Konotey-Ahulu in London at okonoteyahul@bloomberg.net;Joe Mayes in London at jmayes9@bloomberg.net

To contact the editors responsible for this story: Tim Ross at tross54@bloomberg.net, Robert Jameson

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