Firms still operating at half pre-Covid capacity, survey finds

22 Jul 2020 By Francis Churchill

UK’s economic restart remains ‘in first gear’ despite restrictions easing, as employers cite consumer demand and potential local lockdowns as obstacles to opening fully

Companies are still operating at half their pre-coronavirus capacity despite the easing of lockdown measures, a survey of employers has found.

The poll of 750 businesses, conducted by the British Chambers of Commerce (BCC) and Indeed, found companies were operating at 53 per cent capacity, with the majority citing consumer demand and possible future local lockdowns as obstacles to fully restarting operations (54 and 52 per cent respectively). Almost a third (30 per cent) said other business costs, such as rent or salaries, were a major hurdle.

Following the introduction of the flexible furlough scheme at the start of this month, the survey also found just under a third (31 per cent) of firms had furloughed staff on a part-time basis, although the majority (56 per cent) still have employees furloughed full time.

Additionally, one in 10 (13 per cent) had made staff redundant since the beginning of the crisis, and a third (33 per cent) planned to start making redundancies over the next three months.

The research is part of the BCC’s Coronavirus Business Impact Tracker. Adam Marshall, director general of the BCC, said the findings demonstrated that the UK's economic restart was still “very much in first gear".

“Businesses are grappling with reduced customer demand, an ongoing cash crunch and the potential for further lockdowns during an uncertain autumn and winter ahead,” Marshall said. “The prime minister’s encouragement to return to workplaces and further updates to business guidance will not be enough on their own.”

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The survey – which was conducted at the start of the month before the government advice changed to encourage more people back to work – found 62 per cent of organisations had expected some or all of their staff to be working remotely for the next 12 months, rising to 71 per cent for business-to-business companies.

“The time has come for the government to take radical steps to slash the tax burden around employment to help companies pay valued staff,” said Marshall, calling for an increase in the employment allowance and the minimum earnings threshold before employers have to start making national insurance contributions.

While a sharp decline in business conditions at the start of the outbreak were leveling off, the poll found almost half (46 per cent) of respondents still expected a slight or significant decrease in revenue from UK customers in June, with a similar proportion (44 per cent) expecting a revenue drop from customers overseas.

Last week, figures from the Office for National Statistics showed the number of UK workers on payroll fell by 649,000 between March and June – with experts warning that official figures failed to show the true extent of the damage done by the outbreak.

Jack Kennedy, economist at Indeed, said there were 60 per cent fewer job postings than before the outbreak, and that a “v shaped” recovery was unlikely. “With one third of companies planning redundancies over the next three months, we will likely see a scramble for available roles as the labour market becomes heavily supplied with people looking for work,” he said.

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