Sounds dramatic doesn’t it. But thats the stark reality as businesses struggle to access the Government loans announced by Chancellor Rishi Sunak a couple of weeks ago.

Major banks have been in the firing line as they have been offering their own, more expensive commercial loans before offering the Government interest-free option. Then putting up further barriers to businesses when that option is presented.

According to a BBC article, a network of accountants have warned that 800,000 – 1,000,000 businesses could be closed within the next few weeks.

Banks providing barriers

My colleague was talking to his accountant the other night and they predicted the same amount of businesses would close if cash was not given immediately. The major banks appear to be trying to profit from a painful situation as they have been offering their own commercial loans with high interest rates and not offering the more preferable Government loan option, called the Coronavirus Business Interruption Loans. These are interest free for 12 months.

The mistake here by Government was trusting banks to provide these first before their own options to businesses. In this time of crisis, what should have happened is these loans should have been delivered by HMRC or local councils. Or at the very least it should have been legislated that the banks offer this to struggling businesses first before all other options.

Banks have been hit with a massive surge in demand for CIBLs and five smaller lenders have since pulled out of the scheme saying they cannot cope. This is only going to make the situation worse. You can read more about the hurdles in front of some businesses which means 18% of companies may go to the wall:

Banks are asking Directors asking for loans of more than £250,000 to sign personal guarantees. In this current climate, who is going to sign up to something like that?

The Chancellor has warned that not every business would be saved during this period. It seems as though if cash does not start getting to some of these businesses in the next few days, we’re going to see the rate of closures ramp up dramatically in the next week or two.

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Economic fallout rising

At the start of this crisis, as people were trying to predict what would happen after, many said that this wasn’t an issue of demand, and that it would be a V-shape recovery once we have got on top. I think its becoming clear now that the V-shape recovery is going to look more like the Nike tick. Steep drop, then a long time to recover.

The argument that this is not a demand problem is now not valid. Regardless of whether the Government loads come in in time for the SMEs who need it, a big chunk of them still won’t survive the crisis unfortunately. We already know some companies are choosing to lay off staff rather than furlough them, despite Government support available. The reality remains that a lot of people will lose their jobs. In a report I referenced in an article on Monday, the Cebr predicts a rise in unemployment to 7%, and a drop of at least 5% in household consumption in 2020, recovering only to +4% in 2021. Business investment is also forecast to only recover to 2017 highs in 2032.

All of these points and more mean that demand is indeed going to be weakened and in a significant way. That doesn’t mean installers should not try their hardest to get in front of home owners and do their best to win their business. But we also have to be realistic. Once the all clear has been given, there won’t be a magic tap that is turned back on. Many will have lost their jobs. Businesses will have closed, including in our own sector. All of this serves to dampen demand as some home owners will have been unlucky enough to have lost their job, or some will hold on to their money until they feel more confident about the current situation.

We won’t see a total shutdown of orders, not at all. Indeed some companies are still reporting some orders trickling in, even during lockdown which is of course welcome. But we have to be more realistic in our expectations once the UK gets the all clear. I have seen articles in the past few days which sound more like pleas for a bit of “pip pip, stiff upper lip” instead of realistic analysis of the data and predictions coming from a plethora or respected business institutes. Of course forecasts are there to be beat, but we’re going to need a bit more than some positive vibes.

I have put together a 10 point list for installers to make best use of their time during this crisis. The more agile out there who can ride this out stand do well once the dust settles and there is a less crowded market:

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