Covid-19: a catalyst for change amongst SMEs
UK SMES are showing resilience, agility and innovation as they enter the second phase of the coronavirus pandemic, taking the learnings from the first wave of the pandemic and implementing them permanently in their businesses, Paragon Bank research has revealed.
Despite the difficulties caused by the pandemic, half of the SMEs surveyed are feeling positive about the future of their business, with 49% believing that the learnings from the pandemic will help their business become more resilient in the future.
Decision makers commented that Covid-19 forced a positive need to re-invent their business which will make them stronger moving forward. Results show that businesses have implemented numerous changes to get through the pandemic, including reducing costs (34%), targeting new customers (33%) and increasing customer communication (30%). For the majority, these changes are permanent with 73% keeping costs reduced and 70% continuing to target new customers and communicate with customers more.
Interestingly, 19% of SMEs introduced new products or services, and 18% of these stated it would be a permanent change. Online distribution also saw an increase, with 21% starting to offer products or services online as a result.
John Phillipou, managing director of SME Lending at Paragon Bank, said: “There were 5.9 million SMEs recorded in the UK in 2019, accounting for 60% of all private sector jobs. They are undoubtably crucial to the UK economy and have faced a multitude of challenges over the past few months.
“Whilst it has been a difficult time, we have seen resilience and innovation come to the fore of our SME customer base, as businesses remain agile and evolve to the changing environment – targeting new customers, changing suppliers, producing new products and considering new technologies.”
The evolution of customer bases during the pandemic has seen region, profile and type of customer changing for many businesses. Over a third of companies (34%) that had previously sold direct to consumers have adapted so that they now also offer products and services to business customers. Conversely, a quarter of companies (24%) that predominantly have small businesses as customers have experienced more sales to consumers.
In addition, two in five (42%) businesses say their business is now more localised, whereas 45% have increased their geographical reach.
Nearly half (48%) of decision makers developed more productive ways of working as a result of Covid-19. New working arrangements, especially working from home was most commonly embraced as a positive change, which was attributed to cost reduction, boosted employee morale, better engagement and increased wellbeing.
To date Paragon has supported UK SMEs through this challenging period with over £20m in CBILS lending, with a number of deals in the pipeline due to complete.
The full report can be found here.