Some businesses have prospered during the pandemic. However, even healthy companies must remain vigilant as the economic fallout could still affect them. In this article, we’ll take a look at which sectors have thrived under coronavirus and how you can use data to protect your business from falling victim to bad debt.
The way we live our lives has changed due to the pandemic and so, therefore, has the balance of the economy.
Companies that deliver services directly to people in their homes have prospered, while others have benefitted from competitors’ inabilities to adapt.
As a result, some businesses have flourished in the current climate.
However, these success stories aren’t widespread and the economic turbulence hasn’t affected different sectors evenly.
The overall picture remains grim, and UK GDP fell by 2.6% in November 2020.
As a result, many businesses will have bigger debts, smaller revenues, and poorer balance sheets.
It’s encouraging to see some companies doing well. However, even healthy businesses must remain vigilant. The economic fallout could still affect them through the loss of key partners or customers defaulting on debts.
And these companies are becoming harder to spot, as government emergency legislation and support schemes are delaying insolvency amongst struggling businesses.
In this article, we will explore industries that have thrived during lockdown.
We will also explain how you can use data to monitor your customers during these uncertain times and protect your business from bad debt.
Restrictions placed on people mixing over the festive season meant that more households had to make their own Christmas dinner, rather than visit a family member or a friend to eat with them. And with bars and restaurants closed, many turned to supermarkets to get their culinary kicks.
Research from Kantar shows that shoppers spent £11.7 billion on groceries in December 2020, beating the £10.9 billion record for food and drink sales in the previous month.
Premium online home delivery grocer Ocado was the biggest winner, with sales rising by 36.5% during the 12 weeks to 27 December 2020.
German budget retailer Lidl also performed well. Its sales grew by 15.2%, thanks to a voucher scheme that offered 25% off when shoppers spent £40.
Meal kit delivery services like Gousto and Hello Fresh experienced a surge in sales, a sign that consumers have embraced home cooking during lockdown.
Takeaways have also been filling the culinary void. In October 2020, Just Eat reported a 43% increase in UK sales compared with the same period in 2019.
Covid-19 restrictions meant that universities, schools and businesses had to move their learning online.
Many adults who are furloughed, out of work or have more time on their hands have also taken the opportunity to upskill themselves.
As a result, e-learning platforms have seen vast numbers of people enrol in online courses.
For example, language app Duolingo increased user registrations by 132% when compared with the 2019 figures.
In 2020, online course provider Udemy reported a 425% surge in course enrolments.
This sector’s growth doesn’t show signs of slowing down and the global e-learning market will be worth $350 billion by 2025.
With more people forced to work from home during lockdown, cloud-based apps and collaboration and communication tools have become critical.
For example, global spending on cloud infrastructure increased by 37% to $29 billion in Q1 2020 compared to the same period last year and is expected to continue growing during 2021.
Microsoft was among the companies that benefitted from the switch to remote software. Its cloud business revenue increased by 12% to $37.2 billion by the end of Q3 2020.
One of the highest-profile success stories has been video conferencing platform Zoom, which has seen its annual sales skyrocket.
From August to October 2020, its profits amounted to $198.4 million compared with $2.2 million in the same quarter last year.
Cloud services are expected to continue growing in the post-coronavirus world as businesses seek to enhance growth through agile digital infrastructure.
Online Shopping Online shopping made up 28.5% of the UK’s total sales in October 2020, up 8.4% from February.
Amazon was among the big winners, having increased its sales by more than £54.9 billion since the start of 2020.
Online fashion store ASOS also saw website visitors spike at 23.5 million.
As online shopping has grown, so have courier and logistics services.
DHL has delivered 40% more parcels during the pandemic and is now investing more than £17.5 million in developing its network capacity and operations efficiency.
E-sports and Video Games
With activities and sports on hold during lockdown, many have turned to video games to fill the void.
Nintendo revealed a profit of 106.4 billion yen in the first fiscal quarter of 2020, an increase of 89.8 billion yen from this period a year ago.
Similarly, 45% of UK gaming companies declared an increase in revenue.
This surge in gaming hasn’t just been limited to sales of consoles and games. Esports – or watching people play video games competitively – has also grown in popularity.
According to research conducted by law firm Foley & Lardner and The Esports Observer, 73% believe the pandemic will encourage further investment in e-sports.
Poor Financial Health is Harder to Spot than Ever
It’s encouraging to see certain sectors flourishing during these difficult times and some will likely continue to perform well beyond the pandemic.
However, these companies aren’t representative of the overall UK economy and an increasing number of businesses are facing insolvency.
The next 18 months are expected to be challenging and many industries and businesses will struggle.
Even healthy companies could be at risk in this environment. If your customers become insolvent and default on their debts, you could be left thousands of pounds out of pocket.
The key is to take preventative action before the customer goes out of business. However, this is difficult in the current climate.
That’s because government support measures have been keeping these struggling businesses artificially solvent by paying furloughed employees, providing cash and delaying rent payments.
At the same time, emergency coronavirus legislation prevents the use of statutory demands and winding-up petitions.
Our research revealed that in Q2 2020 more than half a million UK businesses were struggling due to coronavirus; this figure would have been higher without the government support schemes.
Spot Risk Early with Red Flag Alert
These are unpredictable times and whether your sector is thriving or struggling, you need to take steps to monitor your customers’ financial health and protect your business from bad debt.
Red Flag Alert can help. We are the UK’s best business database and insolvency scorecard, providing real-time financial health ratings on more than 6 million UK businesses.
Our AI algorithm uses 13 years of financial health analysis and machine learning to predict whether companies are likely to enter insolvency.
Red Flag Alert is the perfect tool for seeing past the fog created by government support measures.
This is done by accounting for the latest coronavirus legislation and assessing less obvious indicators of financial health, like fixed charges, CCJs, and changes to accounting periods.
In this way, Red Flag Alert can help you understand whether your customers pose a threat to your business and allow you to take pre-emptive action.
You are also able to create bespoke monitor lists and receive real time alerts on your business partners, prospective clients or even competitors. Giving yourself the best chance not just to protect yourself from bad debt and business disruption but also the ability to capitalise on any gaps in the market left by a faltering competitor.