How companies have coped with Covid

Businesses have had their world turned upside down in the past year.

Companies radically changed the way they operate to try to stay afloat through social distancing, working from home and stop-start lockdowns - and it appears to have worked.

“UK plc has built some immunity to lockdowns,” says economist Sanjay Raja of Deutsche Bank.

The economy shrank by “just” 2.6pc in November, when England was under lockdown and tight restrictions were in force across much of the rest of the country.

But what began as emergency measures to get money in through the door could end up staying for longer.

Some companies have managed to identify new ways of working that are well worth making permanent.

Take the hospitality industry. Bars, restaurants, pubs and hotels suffered more than most as socialising was banned.

At first some became shops, taking delivery of their supplies of fruit, veg, flour and other basics, and selling it to locals who found shortages in supermarkets.

They were better prepared for the second and third lockdowns.

More offer takeaways, for instance, with demand for treats at home soaring.

But plenty of restaurants have gone beyond this, offering pre-mixed cocktails through the post, or "cook at home" boxes where chefs send out prepared, upmarket meals to finish off in the pan or oven.

“I think those will stick around for longer,” says Kate Nicholls, chief executive of UK Hospitality. “The great advantage is that there is no waste. People place their order for a given time, you cook the food and send it out - there is no worrying ‘am I going to get 50 covers or 20 covers’. You can make it much more productive.”

Under this model, chefs can fulfill these orders when the restaurant is quiet, making more efficient use of their staff and facilities.

Retailers too have sought new ways to sell, typically by investing more in their online operations.

Demand and supply have shifted in tandem, and appear unlikely to fully revert even once restrictions are over.

“The first lockdown forced retailers to really accelerate a lot of their plans for online development,” says Richard Lim at Retail Economics.

“While on one side you’ve got shifting consumer behaviour, it has been matched with a huge boost in online capacity - in distribution, warehousing, people to pick and pack and dispatch products, and investment in websites.”

Online retail rose from below a fifth of all sales in December 2019 to almost a third last month. The lesson from the first lockdown appears to be that shoppers who have shifted online will not entirely go back to physical stores.

“The temptation is to see this all as older customers going online for the first time, but that is not the case,” says Lim, noting that younger shoppers are also joining in, buying goods such as beauty products online that they previously bought in-store.

It is not only consumer-facing businesses. Manufacturing output has been growing steadily since the spring, though it remains almost 5pc below its February levels.

“A massive uptick in the use of digital technology” to find and communicate with suppliers is likely to stay, according to Mark Swift at industry body MakeUK, as is the use of video conferencing for meetings.

The construction industry has had a rollercoaster year, with building sites shutting down in the spring before working out how to reopen safely. By November, output was back above where it had been in February.

Rico Wojtulewicz at the National Federation of Builders says the industry worked hard to produce Covid-safe guidance, for projects from entire building sites to small repair jobs in customers’ homes.

Innovations such as digital training are likely to stay for the long-term, he says.

But the industry faces trouble in the months ahead because sectors it relies on have struggled to adapt.

Many current construction projects received planning permissions in 2019 or early 2020.

But backlogs in the administrative system mean few new approvals are coming through, cutting off the supply of future projects.

“We think over next year there will be a massive drop off,” Wojtulewicz says. 

“We are now going to see the lag of people working from home and the slowdown of the administrative sectors. It is not just planning departments. The conveyancers, the surveyors, they all have massive backlogs of work, so the industry is sitting on a bit of a timebomb.”