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Letter from... Dorset

By Paul Kelly
29 July 2020

By Paul Kelly, Managing Partner

I live in a small town set in quintessential Hardy country and have done so for many years. Indeed, the famous novelist lived for a short while in a property a stone’s throw from where I am writing this.

Thomas Hardy was fascinated by the concept of fate in his novel writing. Apparently, he was strongly influenced at an early age by Darwin’s theory of evolution and many of his best-known works feature the central characters battling with the impact of chance and circumstance in their daily lives.

At the time Hardy was focussed on the effect that mechanisation was having on the rural landscape and people that he cared so much about. His novels reveal how some people survive and thrive and others fail despite their best efforts. I suspect he would have found the impact of Covid19 on the local community of considerable interest too.

Many of my friends are small business owners in the locality. What they all share is a commitment to hard work and making a success of what they are engaged in on their own terms. But COVID 19 has dealt each one of them a very different hand.

Steve runs his own catering company, employing five people including his wife. He has traded successfully for 30 years and he is as shrewd a businessman as I know. But on March 23rd, the day the Government announced lockdown, his forecast revenues fell 98% in 24 hours.  He was able to get a £10,000 Government grant but as his basic costs ran at £3,000 a month, before staffing, that money was burned through in short order. At 58 he was hoping to sell the business in a couple of years by way of a pension. Also, like many small business owners, he and his wife paid themselves a small basic salary and made this up through dividends to be tax efficient. The furlough process has been a lot better for his staff than for him. Many small catering companies such as Steve’s rely on the summer to make money through weddings and events. He describes his current situation as being a “three winter year” as the summer has not materialised for him. He has tried to remain positive, but the stress is really starting to show.

Andy and his brother run a small surgical device supply and repair business servicing local hospitals. They have three staff. Their revenues have fallen 70% over the COVID period because hospitals have not, until very recently, been able to provide routine surgical services. Whilst their revenue decline has been more gradual than Steve’s, the cost of not being able to shift very expensive stock items has forced them both to cut their dividend to nothing. This has left them personally exposed and their business susceptible to larger and better funded competition.  “Our ability to survive in this market was predicated on our ability to respond faster than the multi nationals but the key to keeping going now is trying to retain enough cash to survive until the phone starts ringing again,” he says.

Scott has a roofing company employing a gang of five tradesmen.  Conversely, he has had his best year since he started twenty-five years ago “because lockdown has meant that my customers have had a long time to look at their homes and realise what needs to be done.” Scott and his team have been able to turn the reasonable summer weather to their advantage and they have been busy over the whole of the period. “We were worried about our business before Covid came along and as things turned out it has actually been something of a bonus”, he says.

If you had asked me before the onset of COVID which of the three was the better at business I would not have hesitated to choose Steve. Now he is the one whose business is most likely to go under due to circumstances he could not possibly have foreseen just a few months ago.

The Federation of Small Business has talked of many small businesses being on a “knife edge” and that key to survival was their ability to tap into Government support that makes a difference. But from the vignettes I have presented above it is clear that a one size fits all strategy regarding said support will still leave good companies and good people vulnerable to economic calamity, in a quiet way that most of us won’t notice.

“Character is fate” proclaimed the celebrated Greek Philosopher, Heraclitus. Hardy explored this theme too when narrating the personal tragedies that underpin his novels in the Dorset countryside. But knowing my three friends, as I do, I am really not sure that I agree.