SE Business Leader Magazine: October 2020 by Business Leader magazine

South East

October 2020

From back street office to billion pound business Business Leader talks to James Caan CBE about his journey of success

Fast-Track: War Paint for Men Page 30

Funding for scale-ups Page 34

Revealed: 32 online retail leaders Page 62

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IN THIS ISSUE

10 24 52 18

Contents

BUSINESS LEADER VISION: INSPIRE

INFORM

CONNECT

IN THIS EDITION

FINANCE

LEADERSHIP

24 Debate: Mergers & Acquisitions Business Leader brings together a panel of experts to look at the M&A trends in the UK and around the world

58 Interview: CEO In Focus Nottingham and London-based international property design and real estate firm Handley House speak to Business Leader

Latest News Breaking business news from around the region

10 Feature Interview: James Caan CBE Business Leader spoke to James about his career, thoughts on the economy 30 Fast-Track: War Paint for Men We investigate the innovative start-up War Paint, and it plans to scale-up and break down negative perceptions

ECONOMY 14 Feature: UK Economy With the UK economy in recession, this article will look at what type of recovery we can expect to see 18 Agenda: Brexit With Brexit at the top of the priory list for many businesses and entrepreneurs, we look ahead to January 2021

Business Leader - Inspire â&#x20AC;˘ Inform â&#x20AC;˘ Connect

GROWTH 34 Feature: Scale-Up What are the challenges scale-up businesses are finding around fundingand acquiring later stage growth capital? Business Leader investigates

HR 44 Feature: Remote Working This article looks at how businesses can mitigate cyber security threats in new working dynamic

62 Top 32 Online Retail Leaders Highlighting 32 businesses and their leaders who are the driving force behind the online retail sector. Whether established, disruptors and innovators or have exploded in popularity in recent months

REGIONAL REVIEW 70 Feature: London Experts discuss how the pandemic has devastated the leisure, tourism and hospitality sectors in the capital and evaluate how it will recover

52 Feature: Education With redundancies and unemployment rising, which sectors will be looking for skills and talent?

LATEST NEWS

Inspire • Inform • Connect EDITORIAL Oli Ballard - Editor E: oli.ballard@businessleader.co.uk Barney Cotton - Digital Editor E: barney.cotton@businessleader.co.uk DESIGN/PRODUCTION Adam Whittaker - Senior Designer E: adam.whittaker@businessleader.co.uk Melissa Shephard - Website Development E: melissa.Shephard@businessleader.co.uk Josh Dornbrack - Head of Multimedia E: josh.dornbrack@businessleader.co.uk

Independent judging panel announced for 2020 Go:Tech Awards

SALES Sam Clark - Business Development Manager E: sam.clark@businessleader.co.uk Emma Filby - Business Development Manager E: emma.filby@businessleader.co.uk CIRCULATION Adrian Warburton - Circulation Manager E: adrian.warburton@businessleader.co.uk ACCOUNTS Jo Meredith - Finance Manager E: joanne.meredith@businessleader.co.uk

Ann Hiatt

Anthony Rose

Asma Bashir

Ben Bilsland

MANAGING DIRECTOR Andrew Scott - Managing Director E: andrew@businessleader.co.uk No part of Business Leader Magazine may be reproduced, stored in a retrieval system, or transmitted in any form or by any means without the prior written consent of the editor. Business Leader Magazine will make every effort to return picture material, but this is at the owner’s risk. Due to the nature of the print process, images can be subject to colour variation of up to 15%, therefore Business Leader Magazine cannot be held responsible for such variations.

If you would like to get involved or have any news you would like to share, please contact us on 020 3096 0020 or email: editor@businessleader.co.uk.

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Dr Alex Young

Kenneth Siber

Joel Blake OBE

Jonathan Matlock

Nathan Guest

Oz Alashe MBE

Simon Jones

Zain Ali

Ryan Legge

The Go:Tech Awards celebrate businesses and entrepreneurs leading the way in technology and innovation across the UK. To bring you this event, the Go:Tech Awards collaborate with some of the country’s leading figures within the tech sector to preside over the judging. The categories and judges have been carefully chosen to showcase and evaluate a cross section of the nation’s greatest innovators – from daring start-ups to established thought leaders.

See page 21 for details 2

To get involved with the Go:Tech awards, visit www.gotechawards.co.uk or call 020 3096 0020 or email editor@businessleader.co.uk

October 2020

LATEST NEWS

Record number of female board members across the FTSE 350

Dawn raises £310m to invest in the future of enterprise software Dawn Capital, one of Europe’s largest venture capital fund dedicated to B2B software, has announced the close of Dawn IV at the hard cap of c.£310m.

For the first time more than a third of board members in the UK’s top 350 companies as a whole are women, new data has shown. The figures show a continued increase in representation of women on the boards of the FTSE 350 companies. Despite the challenges faced by businesses through the COVID-19 pandemic, representation of women at the top of business has risen by 3.8% in the last year. While the FTSE 350 as a whole has met the government-backed Hampton Alexander Review’s target to make 33% of board members women individually, some businesses are still failing to meet the mark. The latest data shows that 41% of FTSE 350 companies have not reached the correct representation. Denise Wilson OBE, Chief Executive of the Hampton Alexander Review said: "Recognising the significant impact of the global COVID-19 pandemic on all business activities, it is encouraging to see the number of women at the top of British business continue to increase. This confirms the UK’s business-led voluntary approach is working and the benefits of diversity are being recognised, with business seeking more than ever those with fresh energy, new ideas and diverse perspectives."

Dawn IV will pursue the same strategy as its predecessor funds, investing in Series A and B rounds in Europe’s B2B software start-ups and continuing to fund the bestperforming companies through growth rounds with follow-on funds to successful exits. Dawn Co-founder and General Partner, Norman Fiore commented: “Innovation thrives on instability. System-wide shocks drive change that startups can exploit ruthlessly, while incumbents are incapable of adjusting. Historically, these shocks were either financial, technological or societal. In 2020, we’ve had all three at once: technology shock as the cloud came into its own, financial shock which will force society to do more with less, and a fundamental change to the way our working society is organised. We can’t wait to see where our entrepreneurs take us as we invest Dawn IV and greatly appreciate the support of all our investors in making this a successful fundraise.” Haakon Overli, Dawn Co-founder and General Partner, added: “The fantastic support our investors have shown for Dawn IV reinforces our belief that now really is Europe’s time to build the next generation of category-defining software that will underpin the future of enterprise, work and commerce globally.”

Clearwater International announce merger with Swedish business advisory firm Sweden-based Valentum has today merged with Clearwater International, the global mid-market M&A firm. The Sweden team join the fully integrated Clearwater structure increasing the international footprint to 18 offices in 10 countries across Europe, Asia and North America.

Michael Reeves

Business Leader - Inspire • Inform • Connect

Partners Tomas Almgren and Gustaf Plyhm will drive the M&A advisory business in Sweden from their offices in Stockholm bolstering Clearwater’s presence in the Nordic region.

Michael Reeves, CEO at Clearwater International commented: “Clearwater International’s footprint is continuing to expand to meet the demands and expectations of our clients. "Our global coverage combined with our regional presence provides clients with local access to a wider buyer pool, as well as direct access to private equity (PE) funds which provides more diverse opportunities.”

LATEST NEWS Papa John’s announces new International Headquarters in Milton Keynes

Urban Jungle raises £1.6m to expand into new markets A company which provides insurance to ‘Generation Rent’ and millennials has gained a further £1.6m of investment in its second major funding round of the year. Urban Jungle, founded by Jimmy Williams and Greg Smyth in 2016, has raised a further £1.6m from new and existing investors.

Non-Executive Director in December.

The company’s plans for growth are being backed by experienced entrepreneurs and investors, including former Prudential CEO Rob Devey, Octopus Group CEO Simon Rogerson and Funding Circle co-founder James Meekings. Devey joined the company’s board as a

Williams said: “We’ll be hiring more people in the coming months, investing heavily in marketing and giving the traditional market some serious competition. The insurance sector has been calling for a newcomer to disrupt it for some time and we’re doing just that.”

The latest funding round brings the total raised to £7.8m and comes following a period of growth for the tech start-up, which now has over 25,000 customers and 23 staff, and is growing at over 20% per month.

Papa John’s has announced plans to consolidate its international team in its existing Milton Keynes corporate office as part of a global reorganisation to accelerate long-term growth and innovation. In addition to its two corporate offices in the United States in Atlanta and Louisville, Papa John’s headquarters for its International team in Milton Keynes will centralise all international operations to better support franchisees and the brand’s growth beyond North America. Jack Swaysland, Papa John’s Chief Operating Officer, International, comments: “This is an exciting and significant announcement for Papa John’s as we capitalise on our growth and transformation over the past year internationally. Pizza remains hugely popular in challenging times as well as the good, and our business is performing strongly, putting Papa John’s in a better position than ever to realise tremendous opportunities for international growth.”

EasySend secures £12.6m funding EasySend, the no-code AI-powered platform transforming manual processes into digital journeys, has announced it has raised £12.6m in funding following the completion of an £8.7m Series A funding round led by Hanaco with participation from Intel Capital. The investment will enable the company to double its current staff across its offices, optimise its product development and expand its customer base in the US, Europe, and Asia. Tal Daskal, EasySend CEO and Co-founder, said: “The world is changing. COVID-19 forced traditional enterprises to embrace digital transformation and digital culture at a pace and scale never seen before. Our no-code platform is uniquely positioned to make this digital transition easier for enterprises from a wide range of industries – especially insurance and financial services – enabling them to create new digital products efficiently and effectively while boosting and creating digital opportunities which not only save on development and maintenance costs, but also drive revenue growth.”

October 2020

LATEST NEWS CMA puts immediate stop to Lloyds Banking Group ‘bundling’ business accounts with Bounce Bank Loans

The Competition and Markets Authority (CMA) has stopped Lloyds Banking Group forcing small business customers to open business current accounts when taking out Bounce Back Loans. 'Bundling' is where a bank requires small business customers to open a business current account (BCA) with them when applying for a loan. This restricts competition and limits choice because customers may want to hold an account with one provider while using a different bank for their loan.

Stress-test your business model with this online, interactive Innovation Workout. Forward-looking business leaders and founders are preparing for a new, post-pandemic, global environment for innovation. Join them and join SETsquared, the Global no. 1 business accelerator, to get your business fit for innovation, and ready for growth.

6307 Business Leader Innovation Workout Advert AW.indd 1 Business Leader - Inspire • Inform • Connect

Amazon to create 7,000 new jobs in the UK

Amazon has said it will create a further 7,000 UK jobs this year to meet growing demand. The firm said it had already added 3,000 roles so far in 2020, and so by the end of the year it will have created a total of 10,000 new jobs. Susannah Streeter, Senior Investment and Markets Analyst,

Hargreaves Lansdown comments on the announcement: "This huge expansion announced in the UK by Amazon comes as little surprise, given the massive surge in sales the tech giant has experienced, as the ecommerce sector boomed during the pandemic.”

INNOVATION WORKOUT  FREE TO ATTEND  Designed for digital innovation businesses  Delivered by expert mentors - online  Dates: 9, 10 & 13 November (half days)  Additional dates in 2020

21/09/2020 12:17

LATEST NEWS

ScreenHits TV raises £1.6m in Series A funding

ScreenHits TV, an intuitive UK-based super aggregator for at home content streaming, announced today that it has raised £1.6m in Series A funding. The investment, which brings the company’s total funding to £4.2m, will be used to continue building consumer brand awareness, secure new subscribers and expand into new markets worldwide. Spearheaded by entertainment industry veteran and tech entrepreneur, Rose Adkins Hulse, ScreenHits TV was developed to provide consumers with a single and easy-to-use interface that combines their pre-existing streaming subscription services, videos, and live channels. Hulse said: “ScreenHits TV delivers the most feature-rich aggregating service available today. It offers the functionality of grouping multiple subscriptions under one umbrella, accessing all subscriptions with one sign in, the ability to search all of your channels and platforms in a single use search engine, and stored payment to easily add additional programming.”

Michael Siebers & Johannes Siebers

Former Booking.com CEO invests in Holidu Holidu, a global travel tech company, has announced that former Booking. com CEO Kees Koolen has invested more than £3.6m into the company from his personal fund. The funding follows a period of accelerated growth for Holidu in spite of the general turbulence in the travel market due to the COVID-19 pandemic. The company turned profitable in May and since then generated seven-digit positive EBIT figures. Founded by brothers Johannes and Michael Siebers in 2014, Holidu’s

mission is to make the search and booking of vacation rentals easy. Johannes said: “People had been locked in their apartments due to COVID-19 for a long time and we saw that once it was allowed again, people just wanted to travel. Many of them looked for safer nearby travel options, for which vacation rentals are ideal. We have focused on this segment of the travel market since our foundation and it makes us beyond happy that we have been able to help millions of travellers to have a great summer vacation this year.”

Chip raises a total of £10.7m in under 48 hours Chip, the automatic money-saving app has raised a total of £10.7m from crowdfunding and the government-backed Future Fund, as part of the company’s series A round. The amount, raised in under 48 hours from 6,420 investors, makes it the largest convertible round in UK crowdfunding history as well as the largest crowdfunded Future Fund participation. Chip, which saw 25,000 people pre-register ahead of the round on Crowdcube, raised a total of £2m in under 10 minutes and £4m in under an hour. This investment will be used to fuel Chip’s growth. CEO Simon Rabin, comments: “The growth we’ve seen this year has been incredible, but it’s time to take the business to the next level. Right now we are presented with a huge opportunity to capture a slice of Europe’s €30tn (c. £27tn) savings market that’s ripe for disruption, and Chip is poised ready to accelerate and dominate this space as a market-defining savings and wealth management app.” 6

October 2020

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LATEST NEWS

NVIDIA to acquire Cambridge-based Arm Ltd for £31.15bn

Chewsy announces export deal with Canada

NVIDIA and SoftBank Group Corp (SBG) have announced a definitive agreement under which NVIDIA will acquire Cambridge-based Arm Limited from SBG and the SoftBank Vision Fund in a transaction valued at £31.15bn.

Months after its first export deal, the UK’s first plastic-free, biodegradable chewing gum brand Chewsy is about to enter Canada.

start-up extracts flavours from plants and fruits for its naturally flavoured gums and even produces bespoke flavours on request.

It means Chewsy gum will be sold in 17 countries with exports now accounting for 40% of its turnover. The deal was confirmed before the UK’s coronavirus lockdown and is worth £125,000 over the next five years.

Halai said: “I started getting headaches after chewing regular gum and was shocked to find it has so many artificial ingredients and is made from plastic. When I could not find healthier alternatives, I decided to make my own plant-based, plastic free chewing gum, which was the first from the UK when I started the business.”

Founded in 2018 by Sunitt Halai, the Bedfordshire-headquartered family

The combination brings together NVIDIA’s AI computing platform with Arm’s vast ecosystem to create the premier computing company for the age of artificial intelligence (AI), accelerating innovation while expanding into large, high-growth markets. SoftBank will remain committed to Arm’s long-term success through its ownership stake in NVIDIA, expected to be under 10%. Jensen Huang, Founder and CEO of NVIDIA said: “AI is the most powerful technology force of our time and has launched a new wave of computing. In the years ahead, trillions of computers running AI will create a new internet-of-things that is thousands of times larger than today’s internet-of-people. Our combination will create a company fabulously positioned for the age of AI. “Arm will remain headquartered in Cambridge. We will expand on this great site and build a worldclass AI research facility, supporting developments in healthcare, life sciences, robotics, self-driving cars and other fields. And, to attract researchers and scientists from the UK and around the world to conduct groundbreaking work, NVIDIA will build a state-of-the-art AI supercomputer, powered by Arm CPUs. Arm Cambridge will be a world-class technology center.” 8

HMA Creative secures £1.35m funding from IGF Specialist branded merchandise agency, HMA Creative, has secured a £1.35m funding facility from Independent Growth Finance (IGF), which combines a CBILS loan and confidential invoice discounting solution. The Aylesbury-based creative agency provides promotional marketing merchandising to some of the leading drinks brands in the UK, such as Jameson Whiskey, Absolut, and Malibu. Sue Hurst, Managing Director of HMA Creative, explains: “Every day has been different and sprung on new challenges since the start of lockdown. The facility had to be put in place quickly to allow for a six-month window starting in August and then ramping up to our peak trading in October and November. Not only did this funding give the business a safeguard, it ensured we could keep our team employed ahead of a recession.” October 2020

LATEST NEWS

UK and Japan agree historic free trade agreement The UK has secured a free trade agreement with Japan, which is the UK’s first major trade deal as an independent trading nation and will increase trade with Japan by an estimated £15.2bn. The UK-Japan Comprehensive Economic Partnership Agreement was agreed in principle by International Trade Secretary Liz Truss and Japan’s Foreign Minister Motegi Toshimitsu in early September. UK businesses will benefit from tariff-free trade on 99% of exports to Japan. Government analysis shows that a deal with Japan will deliver a £1.5bn boost to the UK economy and increase UK workers’ wages by £800m in the long run. International Trade Secretary Liz Truss said: "This is a historic moment for the UK and Japan as our first major post-Brexit trade deal. The agreement we have negotiated – in record time and in challenging circumstances – goes far beyond the existing EU deal, as it secures new wins for British businesses in our great manufacturing, food and drink, and tech industries. Strategically, the deal is an important step towards joining the Trans-Pacific Partnership and placing Britain at the centre of a network of modern free trade agreements with like-minded friends and allies."

Stem & Glory Restaurants over-funding on Seedrs within an hour of launch

Co-op announce plans to create 1,000 jobs Despite the pandemic and the challenging times hospitality is facing, Stem & Glory has reached its target for this funding round in less than an hour and is now over funding at 210%. The company set out to raise £40,000, adding to £200,000 already raised in grants and capital contributions, for their new COVID-secure site at the prestigious CB1 development in central Cambridge. Founder Louise Palmer Masterton said: “We are on a mission to disrupt both the world of plant-based food and the traditional hospitality model. Our new omnichannel business model is not only innovative, but will also help pave the way for healthier and more conscious ways of living.” Business Leader - Inspire • Inform • Connect

National grocery retailer the Co-op has announced that it is opening 50 new stores and creating 1,000 new jobs across the UK. The new roles are set to be filled by the end of 2020 and 15 existing sotres will be enlarged to deal with the increased demand. David Roberts, Managing Director, Co-op Property, said: “Co-op works to operate at the heart of local life, making a difference in its communities. Multiple factors

motivate consumers, with ease, choice and added services chief among them. We continually look for new locations, sites which are definitively convenient in their community – closer to our Members and customers with proximity shopping a key consumer consideration. Co-operation is a fundamental part of our DNA, and through our partnership approach we are enriching our offer to make convenience truly compelling in our communities.” 9

COVER STORY

October 2020

JAMES CAAN CBE

‘A V-SHAPED ECONOMIC RECOVERY? – THE FUNDAMENTALS ARE AGAINST YOU' Business Leader talks to James Caan CBE

or its latest cover story interview, Business Leader Magazine spoke to entrepreneur James Caan CBE about his career, thoughts on the economy and how a 'start your own business' revolution could be growing.

CAN YOU TELL US ABOUT YOUR BUSINESS CAREER? I started out life as a young entrepreneur working in recruitment. I left school at sixteen and set the business up on my kitchen table, calling it Alexandra Mann. Today, that business has grown to 7,500 employees and operates in 27 countries. It is ranked number one in the world and has revenues just shy of £1bn. Following the success of Alexandra Mann, I then set up an executive search business which now has 147 offices across 30 countries. I eventually sold Alexandra Mann, and following this I took some out and reflected on my life. I decided to go back to school, and at the age of 40 I enrolled at Harvard Business School. The key buzzword whilst I was studying at Harvard was private equity (PE), and I came back to the UK and set up a firm called Hamilton Bradshaw. Through this business I started investing in entrepreneurs who had passion and drive, but needed some help in scaling the company.

Business Leader - Inspire • Inform • Connect

I have also founded the James Caan Foundation, which helps underprivileged children with their education. I also set up the UK Start Up Loans company in collaboration with government. This was created to foster and encourage people to start their own businesses. I was tasked with identifying potential founders and helping then to start their own company. In total we created 28,000 companies, which employ 86,000 people in total. WHEN YOU ARE INVESTING IN SOMEBODY – WHAT ARE THE TRAITS YOU LOOK FOR? In business, it can be common for an entrepreneur to think that because they have a good idea, they will become a millionaire. The idea only counts for 5% of the opportunity though and sometimes people can think it is 95%. The real success in business is not an idea, but the ability to execute the idea. We all have ideas every day, but they do not come to anything and success happens when you can turn an idea into reality; and I’m looking for somebody who does this. I also look for somebody who demonstrates leadership skills. It is not about you in a business, but who you surround yourself with, and you need to have gravitas and charisma in order to attract good people. Finally, I look for somebody that has a commercial mind. A big reason for a business failing is that it will run out of

cash. I am not looking for an accountant but somebody that is commercially savvy. YOU HAVE EXITED TWO BUSINESSES – WHAT IS THE PROCESS LIKE? To exit a business is much harder than people think. What helps the process is having a strong management team and board structure – the business cannot be too overdependent on the founder. When I was going through the process I didn’t think about the money and what I would do with it, and when I sold the business, it wasn’t the excitement of having the money, but the fear of what I was going to do with the rest of my life. You are in an unusual position because you do not need to work, so you question what you are going to do. You can only play golf and travel for so long before you realise it is a novelty, and you need to start the next phase of your career. CAN YOU TELL US MORE ABOUT YOUR EXPERIENCE OF BEING ON DRAGONS’ DEN? I had never imagined a TV career for myself and it happened by chance. I was sitting at my desk at my PE firm and an executive from BBC called me and said they were looking to add another Dragon to the show.

Cont. 

COVER STORY They already had a retailer in Theo Paphitis; Peter Jones who was involved in technology; Deborah Meaden who worked in the environment space and Duncan Bannatyne who had a leisure empire. The producers felt it would add a different dimension to the show, to have somebody from a PE background. In total I made fourteen investments with £1.4m of my own cash and the best part was competing against four super smart businesspeople. MOVING ON TO ANOTHER SUBJECT – HOW DO YOU FEEL THE PANDEMIC HAS BEEN HANDLED BY GOVERNMENT IN THE UK? I am very frustrated by how it has been handled, and the messaging has been very confusing. Everything was shut down and

then we were told to go out and support the hospitality industry through financial incentives; and now it seems like the brakes are being applied again. I have found the approach to the pandemic farcical, and I do not think the so-called 'experts' we rely on have done us justice when you compare the UK with other countries around the world. If you look at Taiwan and Sweden for example, these are two countries whom I admire in how they have handled the pandemic and protected their economy. HOW DID SWEDEN BETTER MANAGE THE CRISIS IN YOUR OPINION? Sweden took a strong position, which I do admire, as the role of government is to

lead and to protect the economy. They took the opposite approach to the UK, and it is interesting to look at the net result of this. The number of infections in Sweden is 22 for every 1,000 people and in the UK it is 58 people for every 1,000. The UK has twice the infection rate that Sweden has, and we have gone through the whole process of lockdown. I have found other governments more decisive too and France, for example, has been clear that there is no chance of a second lockdown. To continue the analysis of the data when it comes to jobs, we have lost 700,000 in the last five months and we are set to lose another 700,000 jobs in the next three months. When you look at the question of ‘have we managed it well?’ all the data and statistics suggest that we have not. We have spent over £200bn and counting; and we are in a worse position than Sweden. GOVERNMENT HAS ALSO HANDED OUT UNPRECEDENTED NUMBERS OF LOANS TO SAVE MANY BUSINESSES. DO YOU WORRY THOUGH THAT MANY WILL NOT BE ABLE TO PAY THE LOANS BACK? We are implying that the amount of money that has been put into the economy has saved businesses, but I am not sure that is true as the number of business closures is higher than it was pre-pandemic. So, are we saying it has worked – I am not so sure it has, and have we seen the worst? No, I think the worst is yet to come. The major challenges are set to come in October or when the furlough scheme ends, and into 2021 when businesses need to pay back the loans they took out. The reality is that many businesses will go bust because their debts will be higher than their income.

I HAVE FOUND THE APPROACH TO THE PANDEMIC FARCICAL, AND I DO NOT THINK THE SO-CALLED 'EXPERTS' WE RELY ON HAVE DONE US JUSTICE WHEN YOU COMPARE THE UK WITH OTHER COUNTRIES AROUND THE WORLD."

October 2020

JAMES CAAN CBE I believe the furlough scheme has masked the problem and not solved it as we still have already lost over 700,000 jobs. We have also spent billions of pounds on supporting restaurants and bars, but did we get a value add? REGARDING THE RECOVERY – HOW DO YOU SEE THIS BEING SHAPED? I believe we are in this for the long haul, because we need to remember that the loans are just part of the problem. Many businesses in the UK have deferred their VAT too and they will need to pay this back in 2021. VAT is 20% of your turnover, so if you are running a £5m a year business that’s £1m you will need to pay back. If you’re a business owner, you’ll be looking at 2020 and saying it was a terrible year but 2021 looks even worse, as not only do you have to pay back the money you have borrowed, but you’ll need to pay your VAT bill and a huge chunk of your payroll cost. There will be a huge amount of debt challenges that businesses face in 2021 and the fight for survival will be extreme. For the economy to recover, you will need consumers to start spending and businesses to invest – but where will consumers get the money to spend if they have been out of work and they are not earning? and how can companies spend on capital expenditure with so much debt? When people are saying it will be a V-shaped recovery, what are you basing that on? Because the fundamentals are against you unless consumers and businesses start to spend. WITH SO MANY REDUNDANCIES BEING MADE, DO YOU EXPECT TO SEE A BOOM IN PEOPLE SETTING UP THEIR OWN BUSINESSES? Historically, adversity creates opportunity and there will be thousands of people who may have wanted to set up their own business but had a secure job, so they did not take the risk. I expect to see an emergence of sole traders and entrepreneurs in 2021, and many businesses get started in a recession. WHAT ADVICE WOULD YOU GIVE TO SOMEBODY LOOKING TO SET UP A NEW BUSINESS? Typically, when you set up a new business you need to think about raising money, but one thing the last year has taught us is that with 10 million people working from home you may not need to look at raising substantial amounts of money. Business Leader - Inspire • Inform • Connect

THE PE WORLD HAS BEEN TAKEN ABACK AND I THINK IT WILL BE 2021 WHEN THE LOANS NEED TO BE PAID BACK WHERE WE WILL START TO SEE SOME CRACKS IN THE SYSTEM AND IT COULD BE A BUMPER YEAR IN REGARDS TO PE."

I would also say that when you set up your own business, it doesn’t mean you’ll become a millionaire and the initial aim should be to earn more than you did when you were working for somebody else. You do not need to take a huge risk and you do not need to build the biggest business in the world; being an entrepreneur is about baby steps and be clear on what your ambition is. For example, it could be to have a small office; then to employ somebody and it can build and build. I would also say that technology has changed the way we work and made us realise that you do not need offices to set up a business anymore. WHAT WOULD YOU SAY IS A GOOD FORMULA FOR SETTING UP YOUR BUSINESS? For example, let’s say you’re a credit controller and your job is collecting receivables, but your employer has said that they can’t retain you as they don’t have enough work for you. The key word there is enough. The employer may not have enough work for the whole week, but you could ask them if they are happy to retain you for two days, for example. If they say yes, then all you need to do is find three customers for the other days in the week and you will have a small business where you will be earning more than when you were employed.

TO CONCLUDE, REGARDING PRIVATE EQUITY – WHAT TRENDS ARE YOU SEEING? What I am seeing is that valuations have not come down and there is a wall of cash that is waiting to be deployed. The reason why valuations have not come down is because many companies are masking their problems with government subsidies. We felt that as the crisis hit, businesses would review their operations but for some the crisis has not happened yet because they haven’t had to pay their VAT or PAYE and their staff have been on furlough. The PE world has been taken aback and I think it will be 2021 when the loans need to be paid back where we will start to see some cracks in the system, and it could be a bumper year in regards to PE. Ultimately, people may want to exit but it is not a good time to sell as I’m not sure you’ll get a good deal now. In my 30 years in private equity I’ve learnt that you buy when the market is lower and sell when the market is high; and in a low market is when it’s time to deploy capital. I would also say that many people are saying there could be a spike in sales due to changes in Capital Gains Tax but you shouldn’t let tax define your exit strategy.  13

ECONOMY

WHAT TYPE OF RECOVERY CAN THE UK ECONOMY EXPECT?

With the UK economy in recession, this article will look at what type of recovery we can expect to see

our spending is my income’ is how Nobel Prize winning economist Paul Krugman summed up the ingredients to a successful and functioning economy. Looking deeper at the statement, he meant that state intervention – ‘paying a man to dig a hole and fill it’ is better than having him unemployed and letting capitalism take its natural course and following a more liberal economic approach. Certainly, in the UK, over the last few months we have not seen state spending like this since World War Two. But how do we recover now? And what will the recovery look like? Do we follow the economics of Krugman or do we look towards the school of thought proposed by economists like Milton Friedman, who believe state intervention only harms an economy further? Probably, it is something in between. But firstly, it is important to assess where we actually are. 14

The economy now The continuing impact of the COVID-19 virus is expected to see the UK economy contract by 10.3% in 2020, but a second lockdown of even just four weeks could exacerbate the drop in GDP to -12.6%, according to KPMG UK’s latest quarterly Economic Outlook. However, given advancements in vaccine developments for COVID-19, there is a high chance that the pandemic will be overcome by mid-2021. Growth is expected to pick up to 8.4% next year if a vaccine is rolled out by April, with the economy reaching preCOVID-19 levels by early 2023. Three alternative scenarios were considered for the timing of the recovery, based on potential different dates of the vaccine being approved and then rolled out in the UK – and a Brexit deal outcome. KPMG’s base scenario assumes that a vaccine will be approved in January, immediately reducing uncertainty, and rolled out by the end of April enabling all social distancing measures to be removed.

It also assumes the UK and the EU will reach an agreement on their future relationship before the end of the transition period this year. But even just a threemonth delay in rolling out the vaccine could see GDP growth fall to 7.1% in 2021, instead of 8.4%. A range of risks is also considered, where the outcome will impact potential growth. They include a no deal with the EU next year and limited progress in eradicating the pandemic. If these play out, growth in 2021 could fluctuate by between 8.4% and 4% at the least. In regards to what role government has to continue play in the recovery, Yael Selfin, Chief Economist at KPMG UK, comments: “The pandemic has had a more significant impact on sectors that are more labourintensive – and the recession will generate permanent change in some of them, meaning there will be a bigger effect on the labour market than the fall in GDP would imply. “The government has an important role October 2020

FEATURE to play. Not just in continuing to provide short-term support to the economy but in readying the UK for a more productive future, including upskilling a significant part of the workforce and upgrading the UK’s telecommunications network. If we get this right, we could come out of this crisis with a better economy.” The shifting shape of the recovery What has been interesting to note is different business leaders and economists talking about how the recover might be shaped differently. To find out more about this, Business Leader spoke to Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, to find out how she feels the recovery might take shape. Susannah said: "We’ve heard a lot about different shaped recoveries over the last few weeks and months. The question is: will it be V, L, W or even K shaped? “The only part that’s certain for now is the first bit of the shape, that huge second quarter plunge in GDP of 20.4% after the unprecedented shutdown of the UK, with a fragile recovery emerging since May as the economy has started to reopen. “The easing of lockdown measures has had to be balanced with wanting to avoid a second wave of infections and possibly another lockdown, which has dashed hopes for a sharp V-shaped bounce-back. “Over the summer, footfall in high streets and retail parks has been encouraging, and the Eat Out to Help Out scheme has lifted the hospitality sector’s prospects. But the confidence and willingness of consumers to spend is key to any economic revival. Household spending makes up for 63% of our economy’s GDP and this will be very important in supporting a sustained recovery.” Consumer spending is indeed key but how will this be impacted by the retracting furlough scheme? Susannah says: “This is where unwinding the furlough scheme could have a major impact, with the prospect of further mass redundancies. The Office for Budget Responsibility is predicting that unemployment could peak at 12% before Christmas. So, there is no surprise that calls to extend the government’s job retention scheme beyond October are coming thick and fast. “It also appears that the post-pandemic Business Leader - Inspire • Inform • Connect

rebound in construction has dwindled. Despite a record surge in house prices, boosted by the stamp duty holiday, disappointing PMI data released last week indicates that the civil engineering sector fell back into contraction in August and growth in the commercial and housebuilding sectors slowed. “So, even if a Yael Selfin V-shaped recovery KPMG emerges it is likely to be a wobbly one, and could easily turn into a W if the gradual return to normality increases infection rates again, necessitating a second lockdown. Indeed, this has already emerged in pockets around the UK, where tough local restrictions have been imposed following spikes in coronavirus cases. “What seems increasingly likely though, is that we’ll see a K-shaped recovery, with two lines diverging to indicate the growing gap between sectors recovering quickly and those that lag seriously behind. The Governor of the Bank of England, Andrew Bailey, has already described the recovery as uneven and, if current trends continue, winners and losers may emerge even more sharply.” The K-shaped recovery As Susannah mentions, the K-shaped recovery shines a light on the 'haves and the have nots' when it comes to different sectors.

Susannah Streeter Hargreaves Lansdown

computer programming and consultancy services also posted positive figures for the pandemic period as millions of people adjusted to working from home. “The travel and tourism sector, on the other hand, is still depressed after a sustained drop in demand for flights and the re-imposition of quarantine measures. Although there are bright spots in the retail and hospitality industry emerging, strict social distancing rules means that any significant recovery in the theatre and live performance industry is likely to be delayed until next year.” Inflationary pressures Struggling parts of the economy has meant government support, something which Krugman would have liked. Friedman, maybe not so much.

Susannah elaborates further on which sectors are doing better than others and says: “Despite the tough conditions for most across the country, some industries have fared better through the pandemic and its repercussions. The shift to online shopping has resulted in a massive surge in sales for Amazon.

On the impact of this support, Susannah says: “The bill for supporting sectors in need has already ballooned and, with such huge government stimulus programmes around the world, there is a risk of significantly higher inflation down the road. Although the tech giants are looking like the big winners right now, higher inflation will have implications for their huge cash balances.

“As people shunned cinemas and dining out for streaming and eating in, that’s boosted the fortunes of Netflix and Apple, as well as supermarket chains and takeaway services with efficient delivery services. IT Support,

Cont.  15

ECONOMY FEATURE

“We are dealing with a shape shifting recovery, buffeted by the winds of government policy, a crisis in consumer confidence and fears that the pandemic is far from over. That could lead to a perfect storm of a flat-lining L-shaped scenario for the economy. So now, more than ever, investors should maintain a balanced, diversified portfolio, and ensure they hold a mix of shares or funds in different sectors, to aim for more consistent long-term returns." Matt Griffith is Director of Policy at Business West – an organisation that supports business growth and works with government on shaping policy. Business Leader spoke to him to get his views on how the economy is being impacted. On how he sees the recovery, he said: “After a torrid few months, who feels confident to predict the economic future? Forecasting looks like a mugs game, but here are some critical issues to watch, gathered from intelligence gained from across our regional business membership. “COVID-19 has revealed the cruel, happenchance nature of crisis – both on who is impacted and who won support. Some have thrived, others crippled. Recovery is also likely to be highly differentiated by sector and region. How strong the bounce back is relies upon other drivers of growth getting going quickly, but also on sectoral quirks of fate – will further restrictions make hospitality fall again, will lockdowns in other global countries squeeze our export recovery?” When it comes to jobs and how this will impact the recovery Matt says: “Our recent survey of over 500 firms found that, of those making redundancies, 86% of firms said they had already done this, or would do so by October. The jobs shock to the economy is ongoing, but is mercifully appears quite near term. But the main contingency

identified was the overall health of UK plc. An uncomfortably large 20% of respondents said they were still unsure of their jobs intentions. “How well overall UK demand holds up, and how quickly firms can return to business and absorb jobs back into the labour market, is a critical element of the speed of Matt Griffith - Business West recovery. We have concerns that the counterbalancing interventions after the end of the furlough going to rear their head – as the freeze on scheme may not be enough. So watch the business evictions is ended and loans start employment statistics, not just for firing, but facing repayment deadlines. for hiring too.” “What Rishi Sunak does to encourage businesses to get back to investing, What is the long-term cost of COVID-19 and what government does to help with underinvestment? liabilities, are the next big challenges for On how the pandemic is impacting the investment firms make, Matt continues: “Our government.” survey highlighted how big an impact the Brexit finally rears its head COVID-19 crisis has on both firms’ financial And then there is Brexit. The impact the UK health (with big drops to profits and cash leaving the EU will have on the economy can reserves reported) but also how much firms be argued over for days; but Matt feels that had pulled or delayed investment. timing is a critical issue. “We have seen sharp drops in investment in physical plant, in human capital and skills, in product development or investment in new markets and exports. Any continuation of these trends will spell bad news for the UK’s long-term growth prospects and our already poor levels of productivity and wage growth. “Firms have also racked up plenty of postponed bills, rent and taken on new debt – particularly via the government’s CBILS and Bounce Back loan schemes. These are

WHAT RISHI SUNAK DOES TO ENCOURAGE BUSINESSES TO GET BACK TO INVESTING, AND WHAT GOVERNMENT DOES TO HELP WITH LIABILITIES, ARE THE NEXT BIG CHALLENGES FOR GOVERNMENT." Matt Griffith

He says: “After dragging on for an age, the Brexit denouement could not come at a worse time. The game of negotiating chicken is hardly calming nerves. If handled badly – and resulting in 'No Deal' – the UK faces a very unwelcome shock, to those areas of the economy that have held up often best through the COVID-19 crisis: cross supply chains, manufacturing, food & drink and UK exports – just at a point we need the economy to be powering ahead. “A bounce back from the dark days of April and May is undoubtedly happening. Firms should crack on to return to health, but government needs to steer the ship very wisely to avoid the big risks to growth." In conclusion, it seems that a V-shaped recovery is most likely, with lots of government help required for struggling sectors. Paul Krugman could be right – ‘your spending is my income’.  October 2020

AGENDA

BREXIT:

BACK ON THE AGENDA

ollowing months of turbulence caused by the COVID-19 crisis and the subsequent lockdown, Brexit has risen to the top of the priority list for many businesses and entrepreneurs. With perpetual uncertainties and many arguing that there is a lack of direction from government and leading companies – what is next for British business ahead of January 2021?

Preparing for the unknown Although the Brexit Referendum was more than four years ago, the constant evolution and debate surrounding the subject has left many businesses still staring at an uncertain future. And following the outbreak of COVID-19, many are reeling from an already devastating situation for their company. Matt Griffith, Director of Policy at Business West comments: “This summer has been a painful time for many businesses, and with the damage caused by COVID-19, many now despair at the idea

of further Brexit disruption that the end of the transition period will bring. However, by understanding what you may change and how to overcome these obstacles, businesses can feel prepared for what January 2021 will bring. “The first thing to establish is how exposed you are to the changes that Brexit may bring, in both the deal and no-deal scenarios. For instance, do you import and/or export to the EU? Does your supply chain? What type of contract do you have with your customers? Will your labelling and certification have to change after Brexit?” October 2020

BREXIT These questions need to be addressed before any business can truly say they are prepared for the impact of a coronavirusaffected Brexit. In 2021, all imports and export goods will have to be declared at customs, and businesses should contact relevant trade bodies to understand the new export document obligations and get advice from a local provider. Companies are being urged to check their incoterms to establish who will be responsible for new VAT payments.

Matt Griffith - Business West

Import VAT will apply for goods going into both the UK and EU customs territory, and for goods coming into the UK, there will be a mechanism to delay VAT payments up to six months. All firms should check their import/ export certifications, as they will need updated documentation in order to sell into the EU.

James Berry - University College London (UCL)

Susannah Streeter - Hargreaves Lansdown

THE EFFECTS OF POLITICAL DECISIONS LIKE BREXIT DON’T JUST CREATE VOLATILITY IN FINANCIAL MARKETS, THEY LEAD TO HUGE UNCERTAINTY FOR BUSINESSES AS FUTURE TRADING PLANS ARE THROWN UP IN THE AIR, WHILE NEW RULEBOOKS ARE WRITTEN" Susannah Streeter

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Even after this has been put in place, there is still an issue around the finalities of the Brexit agreement with the EU and individual companies across the world. James Berry, Director at University College London (UCL), explains: “I think people are looking at ‘No Deal’ as the worst possible outcome, but in a negotiated deal, inevitably some industries will lose, and others win on either side of the new border. In terms of our ability to prepare, at least we know what ‘No Deal’ will mean, in that we will revert to the World Trade organisation (WTO) rules. The agreements that are yet to be struck with Europe or anywhere else still have significant unknown parameters, which makes them very hard to prepare for, for the good or bad they will deliver to different sectors.” It is this uncertainty that has caused a plethora of issues when it comes to preparing a business for the Brexit transition. Susannah Streeter, Senior Investment and Markets Analyst at Hargreaves Lansdown, said: “The effects of political decisions like Brexit don’t just create volatility in financial markets, they lead to huge uncertainty for businesses as future trading plans are thrown up in the air, while new rulebooks are written. “We have already seen that, since the referendum, UK companies with a domestic focus have significantly lagged behind on the financial markets. Investors have been worried about the impact Brexit will have

on companies’ ability to earn future profits within the UK, compared to firms with a global business. “Those concerns have been heightened with renewed speculation over a no-deal Brexit. So, now is the time to look at how best businesses can be insulated against those risks, such as seeking out new revenue streams which don’t depend on how fast the UK economy is growing or entering into value markets, which tend to do well as consumers trade down during tough times.” This has led to many industries looking at how they can prepare their workforce for the changes. However, with many EU workers in the UK – what can business owners do to prepare? Streeter continues: “Many UK businesses are hugely reliant on EU workers so, if you haven’t already, it’s vital to check that they have applied for settled status or if, like many EU citizens living here, they’ve had problems getting their applications approved. If some of your employees are working in the EU, it’s also important to help them complete the necessary paperwork to ensure they can continue living and working in the countries vital to your business.” However, the most important factor to consider is the ability to monitor cash in order to survive through the pandemic and be prepared for imminent arrival of Brexit. Credebt and itsettled CEO, and advisor to the government’s Parliamentary Review and Leadership Council, Glen Morgan comments: “In the midst of so much uncertainty, and with the end of the Brexit transition looming, the best thing that we, or any business, can do at present is to ensure that we’ve got a handle on our cash flow. No one knows exactly how the next six to 12 months will pan out, but if you have adequate money in the bank and maintain a positive position you should be able to ride out the coming storm.” Impact of COVID-19 2020 has been a challenging year for everyone – primarily due to the ever-present and continued impact of the coronavirus crisis on all facets of business and life.

Cont.  19

AGENDA

Jeremy Thomson-Cook, Chief Economist at Equals Money, said: “Like Brexit, the pandemic brought about unprecedented change for businesses of all sizes. However, while Brexit came with a transition period within which businesses have ostensibly had time to plan, coordinate and implement changes to their supply chains, contracts, pricing, regulations and staffing, the pandemic forced a more immediate need for change which has left many businesses reeling. "This means businesses are now not only trying to navigate and survive the current pandemic and ever-present threat of a recession, but they are also having to work out how they will weather the storm of Brexit, without knowing if or when a deal will be agreed and what exactly it will look like.

Glen Morgan - Credebt & Itsettled

Jeremy Thomson-Cook - Equals Money

Hamish Muress - OFX

Dr Peter Holmes - University of Sussex Business School

“Brexit is the last thing that British businesses need right now, especially as the support of the furlough scheme is coming to an end, which has provided a lifeline for many. We’re likely to see even more businesses rely on government support as a result in the coming months.” Hamish Muress, SME Currency Strategist at international payments company, OFX, agrees: “The coronavirus outbreak has added yet another layer of complexity for UK businesses, during what was already an extremely turbulent time. “Back at the turn of 2020, I had bet that the biggest worry for most British businesses this year would be the ongoing uncertainty of Brexit – what Britain’s exit would look like, how the separation would impact international trade, and what it would mean for the money they take home at the end of the day from any international sales.

BREXIT IS THE LAST THING THAT BRITISH BUSINESSES NEED RIGHT NOW, ESPECIALLY AS THE SUPPORT OF THE FURLOUGH SCHEME IS COMING TO AN END, WHICH HAS PROVIDED A LIFELINE FOR MANY. WE’RE LIKELY TO SEE EVEN MORE BUSINESSES RELY ON GOVERNMENT SUPPORT AS A RESULT IN THE COMING MONTHS." Jeremy Thomson-Cook

“While those concerns are still there, there are now plenty more factors to contend with. As we approach the end of the government’s job retention scheme in October, unemployment levels are already creeping up, while the end of other support schemes, including the deferral of VAT payments and business support loans and grants, poses another headache. This will be particularly true for smaller, less established businesses unsure of how a post-pandemic future will look for them.” Perhaps the largest challenge and concern for business leaders is the fact that there are still many unknowns regarding the Brexit transition. Dr Peter Holmes, Fellow in the UK Trade Policy Observatory (UKTPO) at the University of Sussex Business School, said: “The end of the transition period undoubtedly creates more challenges for businesses. Companies are facing the direct problems related to the COVID-19 pandemic at the same time as having

to deal with the consequences of the slow decision making and uncertainty surrounding agreements on what Britain's future trading systems will look like. The UK government has still to spell out what the procedures will be on the UK side and the drama over the Internal Market Bill shows how uncertain outcomes are. “Any new FTAs the government secures, such as the recent one with Japan, will be with markets further away and which are mostly smaller and less liberal than the current arrangements with the EU. Exit from the EU itself makes trade with counties harder, not easier." With no concrete definition of what a posttransition Britain will look like – companies of all sizes and sectors may be left in the dark until the New Year. Thomson-Cook comments: “Like many of the negotiation discussions surrounding Brexit, the latest negotiations are expected to go down to the wire, which unfortunately October 2020

BREXIT

means businesses don’t have much time to prepare as the end of the year draws closer. However, international businesses and those companies involved in integrated supply chains should revisit their no-deal plans to ensure that any transition to a new trading environment is not made more difficult than it needs to be. “The transition period was put in place ostensibly to allow businesses to plan and look for opportunities amongst any challenges they may face when the UK leaves the EU. However, the COVID-19 pandemic has meant many businesses have lost out on precious planning time as they focused their attentions on navigating

and surviving the pandemic. On top of that, many businesses will have likely had to draw down on reserves or credit lines to financing to ensure they survived the summer, which could impact survival postBrexit.” A year from now After four years of never-ending debates and a global pandemic that has devastated the business community, it is almost impossible to predict just what is around the corner for companies in every corner of the economy. But, what does the future hold? Morgan comments: “It will be a case of the strongest surviving and unfortunately

I THINK THERE WILL BE A LARGE INCREASE IN BUSINESS FAILURES AND RESTRUCTURINGS. THEN YOU’VE GOT MANY BUSINESSES THAT WILL BE JUST ABOUT HOLDING ON AND WAITING FOR THINGS TO IMPROVE." Glen Morgan

the weaker failing. On average, 660,000 new companies are registered in the UK every year and figures suggest that 60 percent of those will go-under within three years. Around 20% will close their doors within just 12 months. Even before the pandemic and impending end of the Brexit transition, businesses were struggling to keep their doors open. I think there will be a large increase in business failures and restructurings. Then you’ve got many businesses that will be just about holding on and waiting for things to improve. Will that be in the next 12 months? Only time will tell, but these are unique challenges which require robust solutions to overcome them.” Muress continues: “Many fear we may see a rise in the number of ‘zombie companies’ in the UK - those that have only been kept afloat by the various government support schemes that are now coming to an end. As things return to some semblance of normality in the UK, thousands of businesses are trying to get back on their feet.”

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ADVERTORIAL

UK BUSINESS ILL-PREPARED FOR POSTBREXIT CUSTOMS COMPLEXITY 2020 was meant to be the year of ‘Brexit Preparation’. When the UK left the EU on January 1st 2020, firms involved in trade with the EU were set to spend 12 months on planning for new trade and customs requirements and put in place the systems and expertise to manage the customs declarations that will be required for trade with the EU. However, since March COVID-19 has presented a new set of supply chain challenges. During July 2020, Descartes commissioned independent research to ascertain supply chain managers’ general expectations around the impact of Brexit: • Two thirds of businesses have had their Brexit preparations disrupted by COVID-19. • Less than a quarter (23%) have high confidence in their ability to cope with the extra administrative burden of Brexit. • Two thirds (67%) of large firms are very or extremely concerned about longer delays in their supply chain impacting the business post-Brexit. • Fewer than one in five (18%) of UK businesses are prepared for a ‘no deal’ Brexit. • Almost three quarters (72%) are concerned about the customs brokerage market’s capacity post-Brexit. • Two fifths (40%) are concerned about customs declarations impacting their business post-Brexit. Delays to the supply chain (45%) are the biggest concern regarding the impact of Brexit on cross border trade, with tariff payments (40%) and customs declarations (40%) the next highest concerns. These findings also underline the fact that those organisations and supply chain managers with existing experience of customs declarations are far more worried about the implications of Brexit on the business, than those who have yet to discover the complexity of customs processes. 22

Understanding Customs Complexity For any organisation hoping for a lastminute reprieve, customs declarations will be required regardless of whether the UK strikes a free trade deal with the EU. There are essentially two approaches that companies can consider: complete declarations in-house or use an intermediary – a customs broker or freight forwarder – to handle the process. Relying on the latter option, however, could be difficult given the expected huge increase in demand due to Brexit. There are simply not enough third-party providers to support this – a fact recognised, with the research confirming almost three quarters (72%) are concerned about the customs brokerage market capacity after Brexit. Yet when less than a quarter (23%) of companies have confidence in their ability to cope with the extra administration associated with Brexit, and 40% are concerned about customs declarations impacting their business post-Brexit, the options if customs brokers are not available are limited. Taking Control Any company deciding to self-file should consider a software system to streamline and simplify the process. Combining a Software as a Service (SaaS) customs solution that ensures all regulatory changes

are automatically updated and available, with staff training to achieve in-house expertise, provides a strong foundation for Brexit and future business development. Software can also support firms that decide to defer import customs declarations for up to six months by providing the detailed record keeping required by HMRC. Pol Sweeney, VP Sales and Business Manager UK, Descartes, concludes: “Membership of the EU has masked the complexities of customs for many, many businesses. Since the Single Market came into force there have been no customs formalities between the UK and EU for nearly 28 years, over which time international trade has grown and evolved significantly. The fact is that Brexit will have vast implications for any company importing or exporting out of the UK. Our research highlights the need for organisations to act now to ensure the right systems, processes and skills are in place in time.”

For the full research findings, please visit: www.descartes.com/lp/brexit-readinesswhitepaper For help and advice on Brexit, please visit: www.descartes.com/brexit October 2020

IT’S TIME. IN THE WHOLE NEW BREXIT WORLD, WE HAVE THE ROAD MAP. E-CUSTOMS SOLUTIONS If you trade in Europe, it’s time to think about how you’re going to process the import and export declarations required by HMRC for Brexit. Who’s going to do it? How are you going to do it? And if you don’t get it right, how will that impact on your customs compliance, customer service, reputation and bottom line? Descartes’ eCustoms is a tried and tested software solution that’s already trusted by companies of every size, from small traders to global retail brands, manufacturers and freight forwarders, importing and exporting around the world. Our cloud-based solution is user-friendly and internet-based, easy to integrate into your existing systems and accessible wherever you are. It’s always up-to-date and fully compliant with HMRC requirements. The end of the Brexit transition period is approaching. If you want to be ready to do business in Europe from the 1st January, it’s time to get in touch.

DESCARTES.COM/BREXIT

FINANCE DEBATE

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dealihicipitium makers, here to help your business forward. Is as et at aut fuga. Or autActive maximen esenist omnia provid etur?drive Quidelent, ut mo T: +44T:3301 075 952 | E: |rwilkey@hcrlaw.com www.hcrlaw.com +44 3301 075 952 E: richard.wilkey@hcrlaw.com | www.hcrlaw.com

‘TO CONSTRUCT AN M&A DEAL YOU’LL NEED TO JOIN THE ROYAL NAVY – BECAUSE ENTREPRENEURS ARE LIKE PIRATES’

usiness Leader brought together a panel of experts for a debate to look at M&A trends in the UK and around the world.

The debate started with the panel looking at over-arching mergers and acquisitions (M&A) trends; and whether activity is currently increasing or decreasing. Richard Wilkey, who is a Corporate Lawyer, started the debate. He said: “Deal activity is on the increase and this is against a backdrop of some of the lowest total deal values since 2013. This uplift in activity is being driven by low interest rates, corporates having large cash reserves and a large availability of private equity (PE) capital. “There is currently $1.5tn (£1.2tn) globally of dry powder to be deployed by PE funds

for deals, acquisitions and investments. There is good sources of alternative lending available too; and we’re also seeing an increase in liquidations and distressed opportunities, that is driving an increase in deals.” Joanna Scott, from funders Boost & Co, followed on from Richard and said: “For many SME UK businesses, the reasons that people want to acquire remains and there are still people who want to do deals and some of these may have been put on hold due to the lockdown. We are also seeing that many business owners are on a buy and build journey – they have seen a deal and they are looking at who can help them to make it a reality. Getting funding for deals can be tricky though as public markets and banks are still a little bit more cautious. We’re seeing entrepreneurs looking more towards private equity, debt and alternative sources of funding.”

Myles Hamilton from Shaw & Co, a well-known dealmaker, followed on from Joanna and said: “We have lots of deals live at the moment and we’re seeing an increase in activity. We currently have five sale mandates, two equity funded deals and one acquisition that we are working on. Of those eight, six are at the offer stage or later. Of course, we experienced a lull during the lockdown period, but we are not looking in much better shape. “One trend I’m seeing is that business owners do seem to be more open to approaches and we’re seeing deals happen where an approach from a trade buyer is the starting point for a sale. Prior to COVID-19 there was a balance between do I sell now or grow the value of the business before exit, but this has shifted and the perception of risk has changed, with more owners now open to sale.” To finish on trends, the debate turned to Tim Spooner from KPMG. In regards to what trends he is seeing, he said: “I’m seeing more trade parties making approaches to our clients, which seems to be an emerging trend. I’m also having lots of my clients saying that they wish they’d taken an offer they had a year or so ago as they would have experienced a very different lockdown. “Overall, we’re seeing green shoots though and deals are getting done with very good valuation models.” The debate then went from discussing current trends, to what it’s actually like to go through the acquisition process. Answering this, Alan Barratt – the cofounder of Grenade, said: “I have been through two acquisitions, one in 2014 and one in 2017 – the latter a £72m with

October 2020

MERGERS & ACQUISITIONS

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Richard Wilkey Harrison Clark Rickerby

Joanna Scott Boost & Co

Lion Capital, our current PE partner. It is the hardest thing I’ve ever done and it’s a lengthy process. As a founder you feel like a carcass being picked at by vultures as everybody is looking for their piece. “I don’t have children, but I suspect it’s like selling your child as your business and brand is an extension of you as the founder. You grow it from nothing, and you really care about it. Grenade has been my baby; and with a PE partner it’s a bit like getting married, so you need to be really clear about what you and they want, and an exit plan is important.”

ONE OF THE LESSONS I’VE SEEN FROM LOCKDOWN IS THAT MANY BUSINESS OWNERS ARE RE-EVALUATING WHAT THEY’RE DOING AND LOOKING AT WHAT’S REVENUE GENERATING AND WHAT IS PROFIT GENERATING AND BUSINESS OWNERS ARE MORE RECEPTIVE TO LOOKING AT A SALE." Andrew Scott

Business Leader - Inspire • Inform • Connect

Myles Hamilton Shaw & Co

In regards to how bringing on a PE partner changed the business, Alan said: “It definitely formalised it more, which isn’t a bad thing but at the same time you don’t want too much formality as it can crush creativity. I would say we were overly respectful of our first PE partner and we ran a lot of things by them that looking back, we didn’t need to. “I would say you need to make sure it doesn’t change how you run the business and often you find investors want to instigate too much process or shoe-horn in additional people to run the business; and often they don’t need to. In business you’re always torn between employees, investors and suppliers but I always come to the same conclusion – what’s best for the brand? Nobody loses if the brand does well.” Andrew Scott, an investor and business owner, has recently been through the acquisition process too; and shared his experience. He said: “Our process was to identify companies that were less active, and we approached a media and publishing business during lockdown that had been trading since 1977. They were receptive and the deal was completed quickly via

Tim Spooner KPMG

Zoom and emails. One of the lessons I’ve seen from lockdown is that many business owners are re-evaluating what they’re doing and looking at what’s revenue generating and what is profit generating and business owners are more receptive to looking at a sale.” Andrew then talked about valuations and how they are being impacted by rising enquiries to sales. He explained: “For lots of founders the business is their baby and the value they place on it will be different to what an investor may; and the pandemic has thrown the question of valuation up into the air. “One thing I would say is – be very realistic with your expectation as an investor or buyer won’t recognise the time and effort you’ve put in, but they will value the numbers and if they’re really smart they will see the potential of your brand value. “It’s also important to really understand your buyers intentions. Somebody buying a car parts business that wants to run it for themselves will value it differently to an international distributor for example.”

Cont.  25

DEBATE

Sponsors Sponsorsofofthe theMergers Mergers&&Acquisitions Acquisitionspanel paneldiscussion discussion

Our job is to find a buyer who will pay a premium for a business; and often this will be US acquirers.” The debate then looked at the role that building and brand marketing can play in shaping a business for sale. Alan Barratt answered this question. He said: “We have a popular consumer facing brand which is all over global retail; and it’s super visible all of the time and this is something which appeals to investors and can help you to achieve higher multiples when you sell.

Andrew Scott Ascot Group

The debate then shifted back to Richard Wilkey, who discussed how you can best utilise a legal partner. He said: “From a deal point of view, the legals and paperwork at the back end of the deal is often the easier bit. The fun side is helping with the strategic approach and for management teams early engagement with a legal advisor is critical, as this is where we can add the value. “Part of our role is looking at how you can manage situations and understand the culture of different PE houses. A legal partner can assist with these processes and help with structuring deals and preparing documents to approach potential acquisition targets.” Joanna Scott then talked about longer term trends going forward. She said: “At the SME end of the market we’re seeing people going back to deals

Alan Barratt Grenade

that they may have put on hold; and we’re seeing many business owners with buy and build strategies and I think this will continue in the future. “COVID-19 has exposed some businesses where products and the customer base may have been strong, but it may not have been managed or structured correctly; and this is giving acquirers lots of opportunities. This activity will return to normal levels in the next six to twelve months.” In regard to international trends, Myles then gave his view. He said: “With Brexit, US elections and the pandemic, the scene is changing for international buyers and at the moment we’re working with German, Scandinavian and Irish buyers, which shows how diverse the market is. I would say that the UK market remains attractive for international buyers and US buyers remain the most active when it comes to interest in UK firms.

I WOULD SAY THAT THE UK MARKET REMAINS ATTRACTIVE FOR INTERNATIONAL BUYERS AND US BUYERS REMAIN THE MOST ACTIVE WHEN IT COMES TO INTEREST IN UK FIRMS." Myles Hamilton

"The danger is that if you get something wrong everybody sees it but if you get something right, everybody sees it too. It takes time to build a strong brand and investors will look at the numbers rightly, but often I invest in brands that may be loss making but I love the messaging, the team, or the product.” Andrew Scott then talked about potential changes to Capital Gains Tax (CGT) and entrepreneur’s relief and how these may impact M&A activity. He said: “There are rumours that these may get reviewed in November and this would certainly impact the amount of cash you receive when you sell your business. Because of this you may see a spike in sales and people asking how quickly they can get a deal done. Naturally, this will impact the SME end more because with large businesses it is more complex, and the process is lengthier.” Tim Spooner followed on from Andrew by saying: “Entrepreneurs relief was cut earlier in the year and this was a catalyst to push deals along. Further cuts could cause another spike. The forecast going forward is that Capital Gains Tax could be increased and even have parity with income tax, which would create a debate around what owners should do with their businesses. Should they sell or should they wait? “The winds of change are for the tax take to increase to government to pay for the recent public spend and they could potentially consider increasing CGT and maybe go as high at income tax. We are seeing that this is driving the M&A October 2020

MERGERS & ACQUISITIONS process along. The Autumn Statement is in November, so there is a short window for owners to lock in a historically favourable tax rate. “The bigger question for entrepreneurs is will these changes encourage or stifle entrepreneurial behaviour?” Tim also spoke about sectors and said that technology, healthcare, and eCommerce were performing well.

IF YOU ASK WHAT THE FUTURE HOLDS FOR M&A YOU WILL NOT GET TWO PEOPLE WITH THE SAME VIEW. BUT ONE THING THAT WILL REMAIN IS THAT STRONG BUSINESSES IN THE RIGHT SECTOR WHO CAN PROVIDE GOOD DATA WILL ALWAYS HAVE PEOPLE WILLING TO TAKE A PUNT ON THEM.” Tim Spooner The later stages of the debate covered the impact that international developments can have on mergers and acquisitions and Alan Barratt said that recent developments showed what a small place the world had become. Andrew elaborated on this by talking about supply chains. He said: “Business leaders are looking at international activity and how they can get materials, and this is raising questions around supply chains and how they can become more robust as a business by purchasing UK made products.” Tim also said: “If you look at the macro developments that could impact activity it is Brexit, the US election, US and China relations and a potential second wave. If you ask what the future holds for M&A you will not get two people with the same view. But one thing that will remain is that strong businesses in the right sector who can provide good data will always have people willing to take a punt on them.” The debate ended on a quirky note with Alan Barratt giving a piece of advice to business leaders embarking on a sale or acquisition. He said: “Most entrepreneurs are like pirates, so doing a deal means you’ll need to join the Royal Navy.”  Business Leader - Inspire • Inform • Connect

COMMENT

BUYING & SELLING BUSINESSES POST COVID-19 It goes without saying that buyers and sellers will be looking for greater deal protection mechanisms for transactions moving forward. We expect pricing structures to change, and the multiples used being reduced. A lot will depend on whether buyer and seller expectations and risk appetite align. Fewer Locked Boxes A ‘locked box’ involves a price Tom Webb – Partner payable on completion being fixed upon signature. The objective is to give certainty on the consideration at signing and eliminate a lengthy completion accounts process. We are seeing buyers adopting a completion account mechanism and delaying the valuation date, allowing for fluctuations in performance and receivables. A seller unwilling to agree to a completion account mechanism may consider a hybrid structure where the price is set using a locked-box date, but items like cash and working capital are tested at completion. There can then be a price adjustment against expected levels. More Earn-Outs Earn-outs are a contractual provision entitling the seller to additional future compensation if the business achieves set goals. This was commonly used pre COVID-19 and is increasingly relevant given the low confidence since COVID-19. However, sellers may be reluctant to accept this as they have little control after completion. If an earn-out is agreed, the parties should consider whether COVID-19 will be factored in or ignored when calculating earn-out targets. Retention of Minority Stake Rather than buying/selling 100% of a company, parties may share the risk on valuation and the seller may retain some value. While not usually a preferred option, with buyers wanting 100% control, it could be structured to allow the buyer to obtain full control later, with the final price calculated on a future date. Preference/Convertible Shares An alternative to acquiring a minority stake would be to use different capital instruments, e.g. preference/convertible shares. This may allow more flexibility on valuation, given the current turbulence. A buyer could acquire convertible preference shares with the conversion date set for when there is greater stability. The conversion ratio could match the current valuation, but if the seller delivers additional value by that date, the conversion would mean the buyer receives a lower percentage. For further information please contact us on 01225 750 000 or email Tom.Webb@mogersdrewett.com.

www.mogersdrewett.com 27

ADVERTORIAL

Business Leader talks to fast growing LittlePod

usiness Leader recently spoke to Olly Aplin, CEO of real vanilla company LittlePod, about their international growth and his first few months leading the business.

Can you give an overview of the company? LittlePod is a unique, environmentallyconscious company, established in 2010 to promote the use of real vanilla. Our natural vanilla paste in a tube is an affordable, easy-to-use and consistent source of real vanilla. We believe vanilla is a vehicle for holistic growth. It is this delicious, complex and delicate spice that connects us all, not just to the natural environment, but also to the communities who grow and look after this fragile and magical orchid on the Equatorial Belt. Can you tell us about International Real Vanilla Day and what it means to the company? Taking place on October 17th, International Real Vanilla Day is a special occasion on the LittlePod calendar. This offers an opportunity to stop and take a little time to thank the farmers and communities who work so hard to cultivate this wonderful crop and look after the fragile ecosystems on the Equatorial Belt that affect us all, no matter where in the world we might be. Here in East Devon, we are all very excited to be working with Kookai, our new distributor in Tokyo, who have begun proceedings to establish IRVD as an officially-recognised day in Japan. This year, we are asking LittlePodders all over the world to celebrate with us and share their culinary creations on social media. Real vanilla is a fascinating ingredient, which we are learning more about all the time, and International Real Vanilla Day will give us the chance to further our own education. You recently expanded into Japan – can you tell me about that journey? 2020 has seen us mark our 10th 28

anniversary, and as part of the celebrations, we developed a strategy to take LittlePod to Japan, with a trip planned to the FOODEX exhibition in Tokyo a little earlier in the year. When COVID-19 prompted the exhibition to be cancelled, Janet Sawyer BEM, LittlePod’s founder and Executive Chair, decided to travel to Japan regardless, a shrewd decision that has paid dividends, as detailed in our previous appearance in Business Leader. Here at LittlePod, we’re all very excited to be launching LittlePod Japan on October 17th, with the full support of the British Embassy in Tokyo and the DIT. You recently took up the role as CEO – how have you found it so far and what are your goals? The last six months have proved to be a baptism of fire, given the unprecedented impact of COVID-19, but with Janet’s support and guidance, the transition has proved to be smoother and more enjoyable than one might imagine! The enduring relationships that LittlePod has established during our first decade in business have been invaluable, during a time of such uncertainty, and with our natural vanilla paste used and enjoyed by professional chefs and home cooks alike, our versatility has enabled us to keep our heads above water and negotiate this difficult period. On a personal level, LittlePod is supporting me to complete an MBA. This is a fantastic opportunity to learn alongside leaders from a huge and diverse array of companies and sectors, which will stand both myself and the business in good stead, both now and far into the future. To supplement our efforts in the office, we have been striving to put health and wellbeing at the heart of the company. One of the programmes we have

Olly Aplin - CEO, LittlePod

initiated in recent times is working with fit20 Exeter, whose personal training initiative is supporting the whole team to become more active, with obvious benefits for both our physical and mental health. What are the future plans for the company? In the short term, survival shouldn’t be underestimated given all that is going on at the moment. Our main focus, however, is on long-term success and I’m building a senior leadership team who want the business to be driven forward by the shared values of sustainability, education and quality. Having won the Queen’s Award for Enterprise in Sustainable Development in 2018, we have set ourselves a target, to use our entry into Japan to support another application, this time in International Trade. As a young CEO of LittlePod, I am confident of our journey and am ready to embrace the testing and challenging times ahead.

Please do visit our website for further information: www.littlepod.co.uk

October 2020

ADVERTORIAL

Fighting an insurer over lockdown payments New High Court decision may provide policy holders with business interruption insurance coverage for COVID-19

landmark test-case, brought by the Financial Conduct Authority (FCA), has found in favour of policyholders when considering whether business interruption (BI) insurance policies are engaged by the COVID-19 pandemic. Owners of business interruption insurance should now review their policies as they may be eligible for insurance pay-outs. What has happened? Business owners attempting to claim under their BI insurance have faced uncertainty as to whether they are eligible for insurance coverage for losses resulting from COVID-19. Since the pandemic began, a number of insurance providers have disputed that their BI policies covered such losses. To resolve this lack of clarity, the FCA commenced a testcase in the English High Court, considering 21 BI policies to determine whether policyholders would be eligible for insurance pay-outs for losses caused by the pandemic. Whilst only a set number of policies were considered, these represented the most frequently used wordings causing uncertainty. The highly anticipated test-case decision was published last month and found in favour of policyholders on the majority of key issues. Whilst the decision is highly specific to each wording considered, a number of policies were found to provide cover for COVID-19. What does this mean for UK businesses? It is anticipated that over 370,000 policyholders may be affected by this test case, either because they are eligible for insurance pay-outs or because it confirms that their policy does not provide coverage for COVID-19. The decision is welcome news to many of the policyholders involved. Nevertheless, other holders of BI insurance may be eligible for insurance pay-outs where their policy wording is sufficiently similar. Policyholders should seek legal advice to establish whether they are entitled to coverage. What’s next? The position is not yet final, as parties are now able to seek permission to appeal certain parts of the decision to the Supreme Court, with any appeal being heard as soon as

Business Leader - Inspire • Inform • Connect

possible. Nevertheless, policyholders may be able to obtain a pay-out sooner, and the FCA notes that any appeal 'should not preclude policyholders seeking to settle their claims with their insurer before the outcome of any appeal is known'. Advertorial co-authors

Victoria Hobbs Partner

Russell Williamson Senior Associate

Megan Curzon Associate

Bird & Bird & Dispute Resolution With more than 1,300 lawyers and legal practitioners across a worldwide network of 29 offices, Bird & Bird advise businesses on a full range of legal services. Our contentious teams adopt a commercial approach in guiding you through the challenges you face. We fight your corner to get the best outcomes for your business – whether in the courtroom, during negotiations or at the outset of a contract. In your corner from the start – devising strategies to give you a clear competitive edge www.twobirds.com/en/in-focus/in-yourcorner BI insurance and COVID-19 Tracker Our BI tracker lets you see at a glance how the regulators and courts in a variety of jurisdictions view these policies and the coverage claims that have been made. www.twobirds.com/en/in-focus/coronavirus-covid-19/ business-interruption-insurance-and-covid19-tracker Who to contact Victoria Hobbs, Partner, Victoria.hobbs@twobirds.com Russell Williamson, Senior Associate, Russell.williamson@twobirds.com Megan Curzon, Associate, Megan.curzon@twobirds.com Tel: +44 (0)20 7415 6000

ESS LEA IN

R DE

BU S

GROWTH FAST-TRACK

FAST TRACK

'TO BE A TRUE DISRUPTOR,

YOU NEED ATTITUDE AND TO BE BOLD IN WHAT YOU STAND FOR’

usiness Leader recently caught up with Matt Lumb, the former CEO of Tangle Teezer – an exponentially growing haircare business – about what it takes to be a true disruptive force, the challenges he faced and what to look for in an investor. Lumb is now the CEO of men’s makeup brand War Paint for Men. He spoke to us about leading another innovative start-up looking to scale and breaking down negative perceptions.

CAN YOU GIVE AN OVERVIEW OF WAR PAINT AND HOW YOU CAME INTO THE BUSINESS? War Paint for Men is a men’s make-up brand that was founded at the end of 2018 by entrepreneur Danny Gray. He set up the business because of a mental health issue called body dysmorphia, where he obsesses over, and worries about, how he looks. Unfortunately, he got a lot of attention quite early on in his journey at War Paint, 30

following an advert on Twitter that went viral for all the wrong reasons around toxic masculinity. However, it did get people talking about the brand. A few weeks after that he appeared on Dragons’ Den in May 2019 and ended up having all five investors fighting over him. Straight after that, he was asked by L'Oréal to go and talk to them about the business – and he pitched to their investment incubator programme. He was a 33-year-old business owner with a lot of attention on him. He had a great career to that point but had never scaled a brand before. It was just him and one other member of staff. He was looking for someone who had been on an exponential growth journey before and a friend of his, who I had met at a Sunday Times Fast Track event, suggested me. At the time, I was doing some consultancy work for a couple of beauty brands – but as soon as I met him and looked into the

business – I had an amazing gut feeling about the company. The company was only six months old, but I joined as the CEO. I loved the story of the brand and why Danny founded it, and he and I hit it off straight away. Since then, we have gone from strength-to-strength. We have quadrupled monthly sales, more than doubled our annual turnover and successfully secured a round of funding to grow the company further by expanding our team.

OUR GOAL IS TO BE JUST A BIG A HOUSEHOLD BRAND AS TANGLE TEEZER. TO ACHIEVE THIS, WE ARE TRYING TO BE FIRST TO MARKET IN AS MANY PLACES AS POSSIBLE."

October 2020

WAR PAINT At the time, he was the only full-time member of staff and we got chatting about the company. I said he would need management information at his fingertips if he wished to scale as quickly as he wanted too. Following this, I did some consultancy work for him. I’d talk to him each month about the business, cash flow, results and targets. Through this we formed a great team and a great friendship. Six months later he asked if I would join full time. Although my family and job were all in the North West and Shaun was based in London, I didn’t hesitate for a second. I joined full time in January 2011, primarily to look after the finances and see where the role went. But, within two weeks I was helping Shaun in running the company and then doing the finances in the evenings. to-consumer (DTC), but over the last few months we have seriously expanded our retail presence. Our goal is to be just a big a household brand as Tangle Teezer. To achieve this, we are trying to be first to market in as many places as possible. At Tangle Teezer we grew exports from 2% to 82% in just six years. We grew sales in that time period from £1m to £30m. So, that just shows the importance of exporting and being the first to market, when trying to expand a fast-growing business. The goal is to achieve this at War Paint as well! With our goals and message – we are more than just a cosmetics brand, we are a disruptive force within the industry. HOW HAS THE COMPANY GROWN SINCE YOU JOINED? Last August, it was just Danny and myself. But we have had six more join since then, and have quadrupled monthly sales during the COVID-19 pandemic. We are now in premium retail at Harvey Nicholls and John Lewis – a first for a men’s make-up brand. We are also available on Virgin Atlantic flights, and have expanded to be sold in Ireland, and soon in Japan as well. As a brand we are primarily directBusiness Leader - Inspire • Inform • Connect

CAN YOU TELL ME ABOUT YOUR BUSINESS HISTORY PRIOR TO WAR PAINT? I am an accountant by trade, and I was a financial expert for the first 20 years of my career. Tangle Teezer was launched in 2007 by Shaun Pulfrey, who I met in 2010 at an accountancy software seminar – and the business was turning over circa £1.5m.

As we scaled, we had several amazing people join us, and we built the expanding team around them. We just kept growing from there. In the seven years I was at the company – in our first year our turnover was £2.2m, then year-on-year, it went to £4.4m, £8.5m, £13.5m, £23m – and then £29m in 2016. During this time, we won two Queen’s Awards, and were on the Sunday Times Fast/Profit/Export Track lists each year. WHAT WERE THE MAIN CHALLENGES YOU HAD TO OVERCOME AT TANGLE TEEZER TO ACHIEVE SUCH EXPONENTIAL GROWTH? Shaun created a whole new category in haircare products. Prior to Tangle Teezer – a hairbrush was a hairbrush for more than a century. Tangle Teezer broke the mould and created de-tangling as a category. Now, every hairbrush company in the world has a de-tangling brush in their product range. One of the challenges for us was to be first to market in as many places as we could, in the category that we had created. The first to market is often overlooked and undervalued. If you can be a disruptive force and first to market in any category it stands you in good stead – rather than playing catch up. At War Paint, we are playing catch up in South Korea for example. Men’s make-up is popular, driven by the K-Pop generation, which has made it mainstream. So, we are entering a market with a lot of competitors who are already established.

Matt Lumb CEO War Paint

Cont.  31

FAST-TRACK

WAR PAINT

Another challenge we faced at Tangle Teezer was – can UK supply meet international demand? We would have our tenacious sales team driving international interest in the product – and we just couldn’t make enough hairbrushes! When we were looking at increasing production, you then need to look at increase costs for tooling and parts – these provide their own challenges. You need to look at how much cash you have in the bank, as you cannot get asset finance on the tooling – because if you went bankrupt, all we had was an expensive paperweight. So, managing cash was a huge challenge.

you are doing right. However, this means you are constantly managing cash flow, stock numbers and many other factors. For example, if you are on the growth journey and you constantly run out of stock on your website – people will stop coming – and this is especially true for DTC brands like War Paint.

WHAT ARE THE UNIQUE CHALLENGES FACING FAST GROWING BUSINESSES?

CAN YOU TAKE ME THROUGH WAR PAINT’S RECENT INVESTMENT AND WHAT YOU LEARNT FROM IT?

Once you have established a successful product and brand, you then have to deal with the copycat companies and counterfeiters. This is a challenge you need to keep aware of, especially as a scaling business – and we made it clear that it was our intellectual property. Taking a zerotolerance approach helped us stay ahead of the competition. In the early days, this was a daily challenge. People have this assumption that managing a fast-growing company is easy – I disagree with that 100%. The fact that it is growing quickly is a result of something that

The DTC model can be very cash heavy and customer acquisition costs are also very expensive. You are trying to acquire new customers in a tough retail environment – and then you have to convert them to repeat customers. There are many different avenues to go down to try and achieve this, whether it be advertising on Google or elsewhere online – and it is not cheap. It is not like we are just selling men’s deodorant, which isn’t remotely divisive within our industry, or have a negative stigma to overcome. We are trying to change mindsets – and that is a huge challenge. If you want to scale quickly in a DTC environment, and in a fast-moving industry like ours, you need the money behind you. What I would say is to find the right investors. If you are on a fast growth trajectory, this is of the upmost importance. You need to build a relationship between

GETTING AN INVESTOR IS NOT ALL ABOUT THE MONEY – IT IS ABOUT GETTING PEOPLE ONBOARD WHO REALLY GET THE BRAND, AND WHO CAN OPEN DOORS AND MAKE INTRODUCTIONS FOR YOU THAT YOU WOULDN’T HAVE HAD BEFORE INVESTMENT."

the owner/founder, CEO and investor. The founder is the creative influence, but can sometimes be impulsive and passionate about the company. An investor is none of those – they want to deal with someone who is more level-headed and can analyse the business from within – and that is the role of the CEO. Getting an investor is not all about the money – it is about getting people onboard who really get the brand, and who can open doors and make introductions for you that you wouldn’t have had before investment. Getting ‘smart money’ onboard is very important – especially for early stage start-ups and scaling businesses. WHAT DOES IT TAKE TO BE A TRUE DISRUPTIVE FORCE WITHIN YOUR SECTOR? There are three key assets you need to have to become a successful, disruptive brand. First, you need a proven, gamechanging product that works, and isn’t just all marketing. Secondly, for modern businesses, you need a brand that people trust. People don’t buy from brands anymore, they buy into brands. Finally, you need the right team to drive the business forward. If you have one or two of these, you will struggle to build a successful business – you need all three. To be a true disruptor, you need attitude and be bold in what you stand for. You need to wholeheartedly believe in what you are doing, as you will get negative attitudes – but you need to trust in your product, brand and team, and stand by what you are creating through being a disruptive force.  October 2020

SELL ING BUS Y O UR INES S? O

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Knightstone Capital is investing in or acquiring small and medium companies (£500k to £20m) with strong brands and reputation. companies, corporate carve-outs to retirement sales. We will consider most sectors/markets but have particular interest in the following: • Digital/Technology • B2B Services • Business Events • Marketing • E-commerce • Media/Publishing

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ACCESSING LATER STAGE GROWTH CAPITAL WHAT DO SCALE-UP BUSINESSES NEED TO KNOW?

n each edition of Business Leader magazine, we publish a feature looking at the scale-up sector. For this one, we look at the challenges scale-up businesses are finding around funding and acquiring later stage growth capital. The feature also looks at tips for leaders who may be looking to raise later stage growth capital.

Interview with Hugo Lough, finnCap

THE EXPERTS

For example, many B2B companies, especially in the software industry, find as they grow that they pivot from selling smaller size packages to SMEs, say, towards selling to much bigger organisations where there is a different style of sale, generally taking longer to complete.

Hugo Lough Associate Director, finnCap Ben Mekie Principal and Founder, Acuity Associates Giovanni Nani Principal, Frog Capital

What are the challenges scale-up businesses are finding around funding and later stage growth capital? Many scale-ups will find that, while it is much easier to double sales (and impress investors) when their revenue base is only in the low millions, maintaining a good growth rate becomes significantly more challenging as the business scales. The quality of revenue can also change.

Another challenge is visibility of profitability. Companies at growth stage have to contend

Hugo Lough â&#x20AC;&#x201C; finnCap

with not just showing continuing top line growth, but demonstrating that they have a clear path to profitability in the near term. Investors need to be able to see clearly how there is a path to self-sustainable business. Funding growth versus funding losses is nuanced, but important. October 2020

SCALE-UP Last, and certainly not least, it is important to consider the timing around when to raise – what is the current traction? How does the current cash situation look, and should you delay by a few months to reap the rewards of the incremental growth, or would that leave you at risk if the process drags? Can you share any tips for leaders who may be looking to raise later stage growth capital? It is important that companies start thinking about the timings and when to raise growth capital at the earliest possible stage. They should be identifying potential funders and creating a plan that outlines a timeline of activity and considers all parties they could be targeting. On the hiring front, companies should start thinking as soon as possible about who they need on their team to help scale up the business. Are there any gaps? Perhaps there are skill sets that are missing? What might the business need to address soon? Thinking clearly about what is next for the business, and what growth capital will be used for, is also critical. Funds may be used to pivot a business towards a different type of customer, to ramp up sales or marketing, and often at the growth capital stage internationalisation is a goal. Finally, a company should never lose sight of ensuring the highest quality of products and services with all that they do. At growth stage, investors will be scrutinising product market fit and looking at metrics that are indicative of quality of service such as customer churn or the number of new customers – it is vital to demonstrate a first-class product. Are there any emerging trends around later stage growth capital? One trend that has emerged, and one thing scale-ups should be aware of, is that there have been some very fast transitions between Series A and Series B funding. There is clearly a willingness from many funds to provide additional capital early on after a raise, which may come as a surprise to some businesses and should be something to bear in mind. Indeed, there could be a level of backlog deployment occurring as many funds have found it difficult to find the right businesses to invest in or struggled to get comfortable deploying during COVID-19 given the lack of face-toface interaction – there may be some pent-up demand. Another trend is that, particularly in the UK, there is now a greater focus among investors on the underlying profitability of businesses. Previously, money has often gone into businesses where the business model has required very high levels of cash, and many investors now want to be assured that businesses can demonstrate a clear route to profitability. Some of the larger EU and UK venture capital funds are of course still happy to back highly cash consumptive companies given the right potential, but we have seen a general trend towards increased scrutiny of profitability. Business Leader - Inspire • Inform • Connect

COMMENT

SCALE-UP BUSINESS OPPORTUNITIES IN 2020 COVID-19 has impacted businesses of all sizes globally - throwing up challenges but also opportunities. This extends beyond the short-term issues of operating during a pandemic. As a result, businesses have had to fundamentally re-evaluate how they operate and their long-term goals.

Charles van der Lande

Partner, Roxburgh Milkins Scale-ups are no exception to this. As high-growth innovative companies they should, in theory, be well placed to adapt to the new circumstances and maximise the new opportunities. However, a perennial challenge for scale-ups is access to capital.

Unsurprisingly, securing equity funding has become more challenging as a result of COVID-19, particularly for those businesses looking to secure new investors. A recent report by the ScaleUp Institute, Innovate Finance and Deloitte identified a 40% fall in the second quarter of 2020 as compared with the same period in 2019. Investors have also become more focused on ensuring that their existing portfolio companies are adequately capitalised to survive the current crisis, often also taking advantage of matched funding from the Future Fund. Will we see a significant move from ‘defensive’ investment in existing business to investment to exploit the new opportunities? At some point, almost certainly. But as we enter the autumn with cases rising, talk of second lockdowns and with the next stage of Brexit on us, things seem as uncertain as ever. It’s going to be a brave investor who invests in the opportunities now and, if they do, they will be ensuring that any valuation is consistent with the level of risk. If the regular channels of investment are disrupted will government help? The Chancellor has provided a broad range of business support as a result of COVID-19 but this is predominately short-term and is now starting to be withdrawn. This support might be extended but if it is, it will almost certainly be more targeted and limited. In reality, it seems unlikely that government money will fill the gap. So, the COVID-19 landscape for scale ups is likely to be challenging. However, when investor sentiment changes, you’d hope that scaleups who have weathered the storm will be the particularly attractive investment opportunities. For more information on funding or other options for your business, please give us a call.

T: 0117 928 1913 www.roxburghmilkins.com 35

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SCALE-UP BUSINESSES DEMAND AGILE FUNDING Unfortunately, for many time-poor entrepreneurs, the plethora of offerings can prove bewildering. As such, businesses often gravitate towards taking out a term loan via their existing clearing banks or by searching for bank loans on Google, without considering whether there are more appropriate and flexible alternatives in the market.

Ben Mekie – Acuity Associates

By Ben Mekie, Acuity Associates The CFO’s role has never been more critical More than 5,000 unquoted companies in the UK qualify as high-growth businesses according to The ScaleUp Index, a joint research study published by the market analyst Beauhurst and The ScaleUp Institute. Scale-up businesses constitute a very different cohort to many ‘steady state’ SMEs and mid-tier businesses and the individual pressures they face require a close and detailed understanding. These are amplified as they make the transition from thinking tactically to strategically and strive to build new capabilities and resources. Fast-growth businesses face critical cash flow challenges For any fast-growth business, cash flow seldom takes a straight-line trajectory. Spikes in demand, the need to alternately consolidate and build, as well as handle seasonal trading fluctuations, serve to underline the need for more agile solutions Why the ‘obvious’ solution may not be the optimal solution There have never been so many choices of funding options available to businesses. 36

Private Equity – ‘Dry Powder’ Private Equity houses are currently sitting on substantial levels of ‘dry powder’ for investment in businesses looking to scaleup. We will inevitably see the phrase ‘patient capital’ being used more and more, as PE Houses are prepared to wait longer to see exits on both their existing and recently acquired portfolios. Asset-Based Lending – ‘Delivering Headroom’ We will also see asset-based lending playing a growing part in event-driven M&A activity, particularly in tandem with PE sponsored buy and build transactions, where lenders not only fund the purchase consideration of the target but also provide significant additional headroom to drive further growth for the enlarged group. In addition to providing funding against assets such as accounts receivable, inventory, plant & machinery and property, some asset-based lenders will also provide supplementary cash flow loans, subject to EBITDA.

PRIVATE EQUITY HOUSES ARE CURRENTLY SITTING ON SUBSTANTIAL LEVELS OF ‘DRY POWDER’ FOR INVESTMENT IN BUSINESSES LOOKING TO SCALE-UP.”

CASE STUDY: Medical business looking for growth capital When they pitched for scale-up funding (later stage growth capital) – how did they find the process? The business had previously found that asset finance was an excellent way of acquiring equipment (very useful in an asset heavy medical business) and was used extensively to build the business organically and add revenue streams. However, the FD recognised that this was never going to allow a step change in the way the business operated. What were the options? In this particular case, where the business had a clear exit strategy and time horizon in mind, the main option considered was to approach minority investing private equity houses to accelerate growth. Once the strategy had been documented and honed as an investable proposition, the process of meeting potential PE investors commenced in earnest. Details of the raise The PE house, which was a minority investor, agreed to acquire 30% of the business for £5m. The business at the time was turning over £3.5-£4m and the valuation was agreed based on the performance of the expanded group post investment. Tips for other business owners or leaders or who may be looking to raise later stage growth capital Prepare, plan and prepare some more. Start sorting out finances, legals, health and safety and operational issues way before you start going for finance. Make sure your strategy is a) coherent and flows naturally from your current business, and b) is comprehensively documented. This will make your presentation to investors flow and be far more compelling as a proposition and will make the end of the process much cleaner and easier.  October 2020

Delivering Business Ambition How can we help you deliver yours?

Financial services for growth companies ECM | Public & Private M&A | Debt Advisory | Private Growth Capital | Sell-Side Specialists

To find out more about our services and sectors visit www.finncap.com or www.cavendish.com Call – + 44 020 7220 0500 Email: info@finncapgroup.com 1 Bartholomew Close London EC1A 7BL Business Leader - Inspire • Inform • Connect

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Preparing to pitch for scale-up funding Giovanni Nani – Frog Capital

Article by Giovanni Nani, Frog Capital For entrepreneurs looking to raise an early stage round of funding (i.e. seed and Series A), there is plenty of good advice available on how to pitch and position a start-up. But, when it comes to pitching a scale-up business to raise later stage growth capital, the resources publicly available to CEOs to help you prepare for that process are somewhat scarce. Pitching for late stage funding is different. The company is at a different stage of development, and late stage Investors look for different signs of potential. Understanding the process and getting the pitch right (e.g. the narrative, the metrics, the deck, etc.) is critical. These need to be tailored from stage to stage to factor in the specific audience requirements. That does not mean writing a pitch that over-caters to investors, rather adjusting it to ensure it speaks their language with the appropriate tone of voice and focus on key topics.

investors. While their equation for building conviction around an investment may have the same variables (i.e. team, market, traction, etc.), their coefficients are often different. A pitch that reflects the growth stage investor’s mindset will make it easier for that investor to assess the opportunity.

greater. History and track record are key to demonstrating sustainable growth potential.

Often later stage investors have a corporate finance/professional investing background, whereas earlier stage investors are more likely to have operational/start-up experience. Their diverse backgrounds will likely influence their expectations and investment mindset.

Demonstrating a keen handle of KPI monitoring helps create a sense of control. Investors will want to see that you have got the discipline of having a metrics dashboard in place for several quarters and they will expect you to be tracking against specific performance metrics.

Don’t just update a Series A deck In an interview, Bill Reichert, Managing Director at Garage Technology Ventures, says the fundamental difference between early stage and late stage pitching is this: selling a dream vs. selling an operating company and your ability to execute your plans.

Effective Pitching If you are raising a later stage funding round, most likely you will have an existing set of investors onboard already. Leverage their knowledge and experience, A/B test with them, get input and feedback.

The experience gained in raising seed and Series A rounds is certainly valuable, but the differences of what is expected at Series B or later must be well understood. The set of numbers, metrics and evidence that a later stage investor will want to see is

Expect more data driven discussions and more 'difficult', forensic questions. Late stage investors will look to be convinced by data at a more granular level, not just by the bigger picture vision.

For a company at the scale-up phase, you are typically expected to have senior management team in place (or at least an initial form of it). Carefully choose the team around you that will support you in the presentations and will attend meetings. That should typically reflect the way that the company is run day-to-day.

Some elements of a good pitch are universal, but zoom in on the later stage fundraising and you’ll see there are some key pitfalls to avoid. The following six considerations will help ensure your pitch resonates with growth investors: Understanding Investors Ask yourself, 'How can I make it easy for them to make an investment decision?' Growth stage investors will be listening for different things than early stage

October 2020

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EXPANDING YOUR BUSINESS GLOBALLY

his article is by Centuro Global and looks at how scale-ups can expand globally

2020 has been a year that has offered both opportunities and challenges with international expansion. Everyone is aware of how the global marketplace has become more connected and accessible over the past few decades. However, this does not mean the process of doing business overseas should be taken lightly. Any scaling business, whether it is a start-up, SME or multinational, will experience the same challenges when entering a new country. For multinationals the biggest challenge is delivery of a project and assignment of key personnel into a region where they do not have an entity. The urgency to deliver on a contract or government project poses all kinds of legal challenges such as payroll, employment, entity structures, tax liability as well as risk and compliance. Understanding the local regulations of your target market is key to the success of any business and the importance of getting this right cannot be underestimated. In 2014, Airbnb faced an issue when they advertised rental properties in Spain that

did not meet local housing and tourism regulations, forcing the company to pay â&#x201A;Ź30,000 in fines for breach of the law. Furthermore, having the right tax structure in place can save companies considerable costs in the long term and the risk of failure in any given jurisdiction.

for hiring local candidates. Having spent tens of thousands on the structure, the client had to restart the process and register the correct structure. This caused considerable delays, lost time to start the project resulting in losing the contract they were initially assigned to deliver.

Foreign laws and policies differ in every country and businesses invest in knowledgeable corporate professionals who can help navigate the intricacies of the expansion process. At Centuro, this is the problem we are solving. We want to help democratise the access to complex information about the entire global expansion process. We have put together a revolutionary tech platform which has blueprints covering all the top challenges any company faces with their expansion journey. Our product includes a roadmap of how to set up, the requirements, the documents and processes and timeframes.

These costly mistakes can be avoided if project teams simply review the entire legal and tax process of a particular country and then, equipped with that knowledge, they can contact the local expert in their target country. This simple yet powerful and comprehensive tool will change the way companies consume international expansion advice. The blueprints within the platform offer valuable links to government regulations, local banks, government fees, entity structures, comparable tax rate countries and much more. The information is supported by on the ground local support from lawyers, accountants and other professionals, saving businesses precious time and money.

The information has been checked by professionals from around the world specialising in their own jurisdiction and allows companies to fully comprehend the data and avoid expensive mistakes. For example, a client who wanted to set up in Ghana established an entity that did not allow them to transfer expatriate employees to the country as the structure only allowed

There does not appear to be any other platform like this on the market, which allows companies to have access to this kind of information before they make key decisions and then provides trusted local experts to advise and deliver on the projects. ď&#x20AC;ź

October 2020

SCALE-UP

HOW TO SCALE YOUR BUSINESS not managed to get the right advice at the outset or they have not carried out the required due diligence in their selected market. Centuro Global is addressing these challenges by providing a tech platform that offers a web-based database of processes and checklists for over 150 countries, as well as key local contacts to assist. The other major challenge for scale-ups is access to finance. Although there are many options to secure capital, the challenge is always going to be which option is right for you. Investors will be interested in a robust scale-up strategy that demonstrates the vision and capability of succeeding, so the ability to secure finance rests with the quality of your strategic plan. WHAT SHOULD SCALE-UP LEADERS BE PREPARING FOR? Zain Ali – Centuro Global

Interview with Zain Ali, Centuro Global CAN YOU TELL US MORE ABOUT CENTURO GLOBAL AND HOW YOU SUPPORT BUSINESSES? We work with scaling companies and large multinationals who enter new markets for projects or new entity set up. Our work spans across 150 countries worldwide and our core focus has been to make the global expansion process easier for companies. We are trying to cut the red tape and empower businesses with the key facts, information and local contacts they need to help them reach their commercial objectives in new markets.

THERE ARE A NUMBER OF IMPORTANT DECISIONS THAT NEED TO BE MADE WHEN SCALING RANGING FROM HOW TO ENTER A MARKET, THE BEST ENTITY FOR YOU IF YOU’RE LOOKING TO SETUP, TAX IMPLICATIONS, LEGAL REGULATIONS, HOW TO RECRUIT AND/OR RELOCATE STAFF. " Business Leader - Inspire • Inform • Connect

WHAT WOULD YOU SAY ARE THE MAIN CHALLENGES YOU’RE SEEING SCALE-UP BUSINESSES FACING? Scale-up businesses face a host of challenges. Whilst they may have achieved some local success, this will not necessarily translate to wider markets in the same way. Scale-ups must consider product-market fit for each new territory they look to scale to and adapt to local needs, wants and desires. Even with the right offering, scaleups subsequently face countless issues with market entry. There are a number of important decisions that need to be made when scaling, ranging from how to enter a market, the best entity for you if you’re looking to setup, tax implications, legal regulations, how to recruit and/or relocate staff. With such a wide gamut of areas which often impact each other, gaining access to the relevant information and trusted local experts who can offer reliable and cost-effective advice in a timely manner is a major challenge. From experience over the years we have seen companies fail because they have

With the onset of coronavirus, all companies have had numerous challenges in recent months. With the number of liquidations and decline in business operations, funding has been a critical factor at the top of everyone's list of priorities. Many CEO's of growing businesses have commented on the complexity around the funding process, saying it is difficult to find options which are easily comparable. In addition to this there does appear to be a lack of knowledge and understanding amongst CEOs when it comes to accessing equity-based funding. All too frequently, business leaders may push towards debt financing which is not always the right direction for the business.

T: +44 (0)207 458 4600 E: hello@centuroglobal.com www.centuroglobal.com

centuroglobal

NEWS

Crowdcube and Seedrs announce major private equity merger

British crowdfunding platforms Crowdcube and Seedrs have agreed to a merger, in a move that will create one of the world’s largest private equity marketplaces. By joining forces, thousands of ambitious fast-growth businesses and millions of investors will be able to benefit from the joint expertise, services and returns offered by their respective investment platforms. On completion, Jeff Kelisky, Seedrs’ CEO, will serve as CEO of the combined company, and Darren Westlake, Crowdcube CEO and Co-founder, will serve as Executive Chairman. Darren Westlake, CEO and Co-founder of Crowdcube, commented: “Equity crowdfunding has redefined how many ambitious businesses raise investment and engage with their customers. Today’s agreement is an incredibly exciting milestone that will benefit high growth businesses, their investors who believe in their vision and the wider entrepreneurial ecosystem that supports them. Together with Seedrs, we can accelerate plans to further expand in the UK and overseas, launch innovative new products and improve our customers’ experience.” Since 2011, more than £2bn has been invested in campaigns on Crowdcube and Seedrs – and together they have helped more than 1500 companies secure investment, including unicorn businesses BrewDog and Revolut. The merger will be structured as an acquisition by Crowdcube. However, before the merger is formally completed, the deal will need to go through an approval process with shareholders, the Competition & Markets Authority (CMA) and the Financial Conduct Authority (FCA). The transaction is expected to be completed in late 2020/early 2021. 42

Fintech start-up thrives amid postlockdown home improvement boom A fast-growing fintech start-up headed by an experienced product and technology leader is making waves in the home improvement sector. Payaca is a quick and intuitive new suite of apps that allows small home improvement businesses to display customer finance options, as well as send branded quotes, estimates and invoices, all from a smartphone, tablet or computer. Payaca connects homeowners to a panel of lenders who can offer loans up to £35,000 from 2.8% over up to seven years, and 0% deals on credit cards for up to two years. Applying takes just two minutes, results are shown in a few seconds, and payments can be made within two hours. CEO Matt Franklin founded Payaca after several years spent working for OVO Energy, which exposed him to the big opportunities the home improvement space has to offer. “I started Payaca because I could see a huge gap in the market,” Matt explains. “Millions of consumers clearly wanted the option to spread the cost of home improvement spending – but only the really major players in the sector were offering it. “That was very understandable, because, when it comes to finance, there are so many regulatory hoops you have to jump through before you can start – a lot of small businesses would never have the time or the resources to do so. “What I wanted to do with Payaca is to make finance much simpler and more accessible for the trade, and package it into a market leading job management tool with the best user-experience possible. “Our business customers can send their clients a quote which includes an option to connect to several different lenders – all of whom offer great rates, and fast payment. “Ultimately, our software leads to businesses winning more of the jobs they quote for - and at the same time, they see a big increase in their average job value. Given the market conditions, it’s a great time to be helping small businesses thrive.”

October 2020

ADVERTORIAL

Evolving Through The Next Normal – Focus on Customer Value As business leaders reacted and adapted quickly from the shock of COVID-19, we now move into the next phase as companies return to work. Businesses need to proactively build upon their new foundations to ensure success for the next year ahead and beyond, and emerge through future uncertainties even stronger. We outline three key areas that many businesses will now focus on during the next normal. 1. Eliminate the cost of inefficient systems Review non-value adding activity such as sub-optimal processes, inefficient systems in place, and the role of automation in standardised activities to ensure that you are not wasting time, and, by extension, money on all the things that don't need to be done. 2. Increase customer base Many companies will be aggressively targeting new customers both by adding additional value to existing products and services, and increasing their sales and marketing activity. This works within existing markets and diversifying across new ones. 3. Retain customers and maximise customer lifetime value The acquisition costs for each new customer is far higher than those in retaining existing customers. Delivering excellent products and services to delight your existing customer base establishes stronger connection, loyalty and trust. This makes it harder for competitors to lure them away. Providing additional complementary products and services to your portfolio will also increase the lifetime value of the customer to you. Collaboration with other companies to meet the entire start-to-finish customer journey is a valuable strategy to prevent your customers being attracted to your competitors. Business Leader - Inspire • Inform • Connect

Our Service Redesign package will review these three areas, with improvements being identified and implemented throughout a typically three to six month project. •

We determine what value-added products and services will meet the change in customers’ behaviour and requirements

•

We identify processes to best deliver services and the most efficient staff structure which underpins this.

•

We build additional capability and flexibility in your workforce, strengthening your organisation to react to future shocks or respond to future opportunities.

•

any additional changes. In total they increased their client base by 20% and increased their lifetime value per customer by an additional 10%. They are currently operating at 95% capacity and utilising the spare time for innovating new products and services to trial with their existing customers. Emma Shenton is Director and Business Change Ninja at Oakwood Management Consulting, supporting businesses navigating the current situation and delivering a reorganisation that delivers successful, sustainable business change. Learn how Oakwood Management Consulting can transform your business.

Our collaboration partners specialise in the Sales and Marketing to provide a one-stop shop review and transformation

A recent client we worked with during lockdown focused their services and delivery to such an extent that they had 30% more capacity, with no additional staff required. The increasing capability and flexibility of their workforce meant they could redeploy their staff to deliver the products and services most in demand without needing

Call: 0844 057 0273 E: interested@oakwoodmanagementconsulting.com oakwoodmanagementconsulting.com

HR Providing businesses of all sizes with bespoke insurance solutions to safeguard their future T: 020 8633 8430 | E: cyber@astonlark.com | www.astonlark.com/cyber

CYBER SECURITY THREATS

INTENSIFY AS

REMOTE WORKING INCREASES

has evolved at breakneck speed. This is especially true for the technical aspects of working life and the increasing likelihood of a cyber attack.

"Although ransomware and phishing has been around for more than two decades, the threat has accelerated vastly as a result of the pandemic.”

Chris Ross, SVP Sales at Barracuda Networks, comments: “COVID-19 has changed our way of working and intensified cyber threats facing businesses within a very short space of time. What's more, the disruption to businesses around the world has left many companies struggling to maintain security and business continuity, after a string of budget cuts and lost profits.

Barracuda’s own research found that 46% of global businesses have encountered at least one cyber security scare since shifting to a remote working model during the COVID-19 lockdown. What’s more, 49% say they expect to see a data breach or cyber security incident in the near future due to remote working. A further 51% said they have already seen an increase in email phishing attacks since shifting to a remote working model.

mployees in many sectors have had their working lives drastically changed as a result of the COVID-19 pandemic. Millions were forced into remote working in order to contain the spread of the virus, and as a result, created new challenges for business leaders. Most notably, cyber security.

But, why has there been an increased threat?

This article looks at how businesses can mitigate cyber security threats in new working dynamic. For many years, there was a growing movement of remote, blended and home working for modern-thinking businesses – but this mass acceleration of its implementation has left many companies wondering what they can do to help their workers and save their firm from any serious threats. True impact of COVID-19 It is no secret that the pandemic has changed the world beyond recognition, and that every facet of daily business 44

“Cybercriminals have unfortunately, but inevitably, taken the opportunity to capitalise on weakened businesses, remote workers, and flooded services. Public sector, healthcare, business and education institutions have been hit with a multitude of cyber attacks, ranging from phishing, malware and ransomware.

Charlie Wedin, Partner and cyber security expert at international law firm Osborne Clarke, said: "As a result of COVID-19 forcing vast numbers of people to work from home, the potential 'attack surface' of companies has been increased as remote connection tools and protocols are used more often. We have seen a considerable rise in attacks seeking to exploit vulnerabilities in those remote working tools since the start of the COVID-19 pandemic. There has also been a shift in the targeting of phishing attacks. Attackers are taking advantage of COVID-19 interest and playing on fears, using themed phishing and malware campaigns, as well as impersonation of COVID-19 authorities to engage targets.” This increase in the threat can be put down to a number of reasons, but one of the primary ones has been the increased number of devices that are using company data. October 2020

REMOTE WORKING Colin Blumenthal, Managing Director at Complete I.T., part of Sharp UK, explains: “With more people working from home during lockdown, there has been an increase in the number and type of devices used by employees for work. These devices, or endpoints, are unlikely to be covered by a business’ existing security plan. Ensuring that you have full control and visibility over all devices that have access to or store company data is imperative when it comes to securing business systems and following regulations.” Due to the sudden nature of the pandemic and its impact on the working

log in to the network posing as a legitimate user. If user permissions are unrestricted, the hacker can roam undetected, creating chaos. Typically this is done by stealing data, installing ransomware or simply sending out emails purporting to be from an employee instructing funds to be transferred.”

environments many have found themselves in over the last few months, remote working has created many threats that were previously less of an issue. Catherine Aleppo, Head of Cyber at Aston Lark, comments: “Most organisations are not prepared for mass migration to remote working. Quite understandably, the main priority has been to continue trading, even if it has meant risking the use of unencrypted laptops with poor security. “When employees access a company network remotely using just a username and password, it’s much easier for a hacker to gain access. Remote desktop protocol compromise often stems from a phishing attack, tricking victims into sharing their credentials. This enables the attacker to

‘Never trust, always verify’ The statistics and experts within the cyber space paint a bleak picture of the situation, and due to the state of business and economy during these last few months, it is hardly surprising. However, there are some plans that could save many businesses from falling to a cyber threat. Cont. 

CYBERSECURITY THREAT HAS NEVER BEEN SO PREVALENT – WHAT’S YOUR PLAN TO FUTUREPROOF YOUR BUSINESS? Understanding your business security posture today is critical for tomorrow. In the past 12 months, cyberattacks have evolved and become more frequent. The nature of cyberattacks has changed since 2017. A trend in phishing attacks has been identified. In fact, approximately 94% of cyberattacks begin with phishing, while there has been a fall in viruses and other malware. Staying ahead of the game Organisations have become more resilient to attacks and even breaches over time. However, staying ahead of the game and ensuring employees are trained on security awareness can be challenging and time consuming. Yet raising awareness by investing in people, behaviour and business culture plays a critical role in your cybersecurity.

Call 01454 534 009

or email security@nebulait.co.uk www.nebulait.co.uk

It’s important to recognise that increasing your business security posture is a journey with a long-term goal to work towards. It cannot be fixed overnight.

Business Leader - Inspire • Inform • Connect

Where to begin The first step in the journey is to complete a risk assessment to identify the risk level and determine remediation steps. Careful analysis of this assessment will help you to create a plan to combat the threats to your business and lower the risk level. There are three pillars of cybersecurity for proper implementation of any control which you will want to address in your new security posture. These are: process, people and technology. Following guidance and best practice from a cybersecurity framework will add rigour to your plan to futureproof your business, for example NIST, IASME, ISO or CIS. Time to act There’s no better time than now, to think about how you’re going to increase your security posture and how you’re going to get there.

REMOTE WORKING Providing businesses of all sizes with bespoke insurance solutions to safeguard their future T: 020 8633 8430 | E: cyber@astonlark.com | www.astonlark.com/cyber

The latest trend in cyber attack prevention during the pandemic has been the adoption of ‘Zero Trust’ policies. Although it has been in place in businesses across the world over the last few years, its popularity has reached an all-time high due to the severity of the threat during lockdown. Instead of assuming everything behind a company’s firewall is safe, the ‘Zero Trust’ model assumes every access point is a potential breach and therefore verifies every access request as though it originates from an open network. Every access request is fully authenticated, authorised, and encrypted before a user is granted access. According to a recent poll by Deloitte, 37.4% of security professionals say the pandemic has sped-up their organisations’ Zero Trust adoption efforts. Jesper Frederiksen, Vice President and General Manager EMEA, OKTA, said: “While we’ve seen success with organisations quickly scaling remote working security tools, for many this shortterm firefighting approach isn’t sustainable. Now more than ever, with this new dynamic way of working, businesses need to make security a top priority. Companies should be investing in security skills and cultivating IT teams that can sustain and keep a remote workforce secure. "Zero Trust throws away the idea of a trusted internal network versus an untrusted external network; instead, we should consider all network traffic untrusted. The core principle of Zero Trust is to ‘never trust, always verify’.”

Two other plans to ensure a company has a first line of defence against any threat is employee engagement, and making sure supply chains and sister companies are all on the same page.

Chris Connell, Deputy VP Global Sales and Director of European Operations at Kaspersky, said: “The most important policy that businesses should be focusing on at this point in time is awareness. Other cyber attack prevention tools that can Now that employees have become more be utilised include using a virtual private responsible for ensuring the security of network (VPN), spam filters, phishingtheir company, it is up to the employer detection systems, advanced firewalls, to arm them with the necessary tools malware detection, block lists, back-up and knowledge to do so. Given that 73% protection and continuous staff training on of workers say they have not had any the latest threats and prevention tactics. additional IT security However, as the threat awareness training after NOW THAT level intensifies in both they switched to working EMPLOYEES HAVE BECOME the volume and technical from home full-time, it MORE RESPONSIBLE FOR difficulty, revolutionary is not surprising that technologies can be used businesses may have ENSURING THE SECURITY to protect companies. experienced more cyber OF THEIR COMPANY, IT IS UP This includes artificial threats. Leaders should TO THE EMPLOYER TO ARM intelligence, virtual and also be thinking about how THEM WITH THE NECESSARY augmented reality (VR/ to deliver cybersecurity AR). training in effective ways TOOLS AND KNOWLEDGE TO for homeworkers.”

DO SO.’

Wedin continues: "Human error remains a key contributor to cyber incidents and that risk can be exacerbated by remote and blended working. Clear and concise engagement with staff on the risks they face, including in relation to phishing awareness and device security, need to be delivered in an engaging way to seek to mitigate that risk. It is worth considering carrying out some targeted phishing testing to raise awareness. Businesses should also be proactive in asking their suppliers and contractors what they are doing to bolster their own cyber defences and to be able to respond remotely to any incidents. Supply chains introduce further cyber vulnerabilities to one's own organisation." Importance of correct technology If a business seeks out professional advice when looking at dealing with the impact of COVID-19 on remote, home and blended working, they will first suggest implementing the correct software and technology.

Connell said: “To help employees manage their online security, businesses should be installing reliable security solutions on all devices that handle corporate data. This includes antivirus software and the use of services that implement end-to-end encryption, to ensure that all sensitive information is covered with multi-layered security.”

Frederiksen comments: Chris Connell “AI can provide an additional security and information layer by identifying suspicious behavioural patterns. As more and more data is created, the attack surface grows, creating further access points for criminals to exploit. By integrating automation and AI, organisations can empower their teams to manage cybersecurity measures in the most effective way possible.” Ross continues: “The virus has initiated a shift in behavioural change and rapid technology adoption. Advancements in technologies like AR/VR/MR allows people to work, talk, and socialise across an organisation platform. These technologies are affordable and readily available now and the COVID-19 pandemic has provoked a rise in a new phenomenon, where many more companies will become reliant on tools like AR and VR to work and shop. The time is right to scale technologies like AR, VR, and mixed reality and accept them as fully developed technologies that are just as reliable as laptops and smartphones.”  October 2020

Technology requires humans to operate it, and humans make mistakes

90%

of cyber-attacks in 2019 were caused by human error. Donâ&#x20AC;&#x2122;t fall victim to cyber-attacks. Reduce your risk with security protocols and insurance. Speak to Catherine Aleppo, Head of Cyber at Aston Lark, for an advised quote. E: catherine.aleppo@astonlark.com T: 07388 943928 www.astonlark.com/cyber Aston Lark Limited is authorised and regulated by the Financial Conduct Authority. AL-COM-038-0920

MADE TO MEASURE SERVICE FOR BUSINESSES Aston Lark was formed in the summer of 2018 with the merger of Aston Scott and Lark Group. Larkâ&#x20AC;&#x2122;s roots can be traced right back to the 1940s and Aston Scott was formed in 1993. We are proud to now be one of the top five independent Chartered Insurance Brokers in the country, with over 1,000 staff in 35 regional locations, and trusted by over 140,000 clients across the UK and Ireland. Aston Larkâ&#x20AC;&#x2122;s services are wide-ranging, but our customer service is always personal. We treat everyone as an individual, paying close attention to the smallest detail. Our regional network of offices enables a local service where it is required, supported by trade specific specialists in certain locations. This means we can support our business clients with their insurance and risk management requirements in the UK and Ireland where needed. We have a diverse client base and experience in dealing with all commercial sectors and insurances, but also have several other specialist divisions. Our Employee Benefits division supports employers with a wide range of group and staff benefits solutions. We can provide advice and guidance on benefits tailored to your business, such as pensions, life assurance, private medical insurance, and healthcare & wellbeing services. Our award-winning Private Clients division excels in meeting the insurance needs of private individuals, protecting their assets and their passions. With extensive experience of working with private and high-profile clients, we understand how to provide an excellent and discreet service. Whilst providing a made-to-measure service for our clients, we believe this combined knowledge and expertise across all our divisions truly differentiates us.

Visit www.astonlark.com to find out more about our services and how we can help you today.

October 2020

REMOTE WORKING

HOW CAN YOU PROTECT YOUR BUSINESS AGAINST A CYBER ATTACK? Business Leader interviews Catherine Aleppo, Head of Cyber at Aston Lark undetected, creating chaos. Typically this is done by stealing data, installing ransomware or simply sending out emails purporting to be from an employee instructing funds to be transferred. Working in a home environment comes with distractions such as family, pets, and deliveries, all of which make remote workers more susceptible to falling for social engineering scams. They’re also more likely to browse the internet, increasing the chances of visiting an infected or malicious site.

Catherine Aleppo – Head of Cyber

WITH MORE PEOPLE WORKING REMOTELY, WHAT ARE THE MAIN THREATS YOU’RE SEEING WITH REGARDS TO CYBER SECURITY FOR BUSINESSES AND EMPLOYEES? Most organisations are not prepared for mass migration to remote working. Quite understandably, the main priority has been to continue trading, even if it has meant risking the use of unencrypted laptops with poor security. When employees access a company network remotely using just a username and password, it’s much easier for a hacker to gain access. Remote Desktop Protocol (RDP) compromise often stems from a phishing attack, tricking victims into sharing their credentials. This enables the attacker to log in to the network posing as a legitimate user. If user permissions are unrestricted, the hacker can roam

Business Leader - Inspire • Inform • Connect

Few Business Continuity Plans have been tested in a remote environment, making the financial impact of any period of network downtime potentially longer and more severe. Where the necessary level of cyber security is not implemented, threat actors will find, exploit and capitalise on any vulnerability. CAN YOU SHARE SOME BEST PRACTICE AROUND WORKING REMOTELY AND CYBER SECURITY? Implementing cyber awareness training is fundamental in helping employees. Not only do they become more cautious about security but they will learn what to do if they’re subjected to an attack. To maintain security when logging in remotely, employees should use a Virtual Private Network (VPN) with multi-factor authentication enabled. Using a firewall can help monitor untrusted network traffic. Devices should have up-to-date operating

systems and use supported software. Having a time delay between successive log-in attempts restricts the number of password guesses that can be made by a hacker trying to gain unauthorised access. Restricting privileges ensures users only have access to what is required for them to do their job. Businesses relying on a backup strategy must be testing them and have connected and disconnected back-ups. Even with every security measure in place, there are no absolutes in risk management. A ‘belt and braces’ approach is required that reduces the risk with security protocols and mitigates the risk with insurance. WHAT ARE THE KEY CYBER THREATS YOU ARE SEEING? Technology requires humans to operate it, and humans make mistakes. Ransomware continues to be a significant threat. With data exfiltration now commonplace in ransomware attacks, even having regained full access to their data, a business still faces the costs associated with a potential privacy breach. Business email compromise is another sizable threat often leading to funds transfer fraud and data theft. The mishandling of cyber events can cost an organisation dearly, damaging not only the bottom line, but their reputation. This is why it’s so important to have the incident response support along with the protection that comes with a cyber insurance policy.

T: 020 8633 8430 E: cyber@astonlark.com www.astonlark.com/cyber

Leaders in Lockdown 2020 A survey conducted by ORESA.co.uk

46%

55%

OF BUSINESS WERE ‘INNOVATING OR BUILDING A NEW PLAN’

As the UK went into lockdown, the team at ORESA decided it would be useful to track the sentiment of business leaders. Surveying c.200 Board or C-suite level executives in late spring, and then again in summer, they were able to provide insight into how leaders were feeling, adapting their thinking and evolving their strategies during the pandemic. The surveys showed how leaders were struggling but also many positive signs, not least that leaders saw recovery coming within an 18-month period and many had plans to recruit and grow.

62%

TRADING CONDITIONS HAVE STARTED TO IMPROVE

Future Strategy According to the survey, over half of businesses were innovating or building a new plan during the summer. And whilst 13% were still ‘firefighting’, it appeared that generally leaders were feeling slightly more confident, with 46% saying trading conditions had started to improve. This was borne out by the recent growth stats from the ONS and the fact that there are many businesses in growth due to or despite the pandemic.

mindset and an agile approach; however to take advantage, CEOs will need to align their strategy, structure and leadership talent.”

With the threat of another lockdown, this is an uncertain time, making the challenge of architecting the plan even more critical. For some, the outside viewpoint of a growth consultant will help in this process. As Orlando Martins, CEO of ORESA says:

By summer, signs of weariness were setting in; 45% of leaders were working more hours than before the pandemic, and 62% were reassessing their work-life balance.

“Whilst the markets are turbulent, this is fertile ground for those with the right 50

REASSESSING WORK LIFE BALANCE

Leading in Lockdown The surveys conducted by ORESA showed that UK based CEOs and senior business leaders felt that lockdown had negatively affected their ability to do their job. Indeed, the figure rose by 8% between the first and most recent survey.

When asked about this, Martins said: “The 2020 holiday calendar was shot to pieces, with leaders foregoing almost every break including their summer October 2020

78%

45% OF LEADERS WORKING MORE HOURS

SAY THEY WILL RECRUIT PEOPLE WITH BROADER SKILL SETS

100

35%

SAY LOCKDOWN HAS NEGATIVELY AFFECTED THEIR ABILITY TO DO THEIR JOB

holidays. The net result is leaders struggling to find balance and getting exhausted. We anticipate changes both at CEO and senior leadership levels as boards and investors seek new energy.” Recruiting via Zoom With regards to employment, ORESA discovered that 41% of leaders would recruit within three months of the survey. It is too early to confirm whether this happened but vacancies in the UK in June to August 2020 were at an estimated 434,000; almost 30% higher than the record low in April to June 2020 [Office for National Statistics].

41%

40% HAPPY TO EMPLOY AND ON-BOARD REMOTELY

For many the move to virtual recruitment was a surprise. “We’ve assisted many businesses in their searches for C-suite and senior leaders during lockdown. Many companies are now happy to employ and on-board someone without having met them in person,” says Martins. According to the survey by ORESA, over three quarters of leaders said that recruitment would be focused on those with broader skill sets, rather than single subject experts, suggesting that there will be fewer, but better, jobs available in the coming months.

OF LEADERS WERE LOOKING TO RECRUIT BY SEPTEMBER 2020

Additionally, the most sought-after attributes that leaders were looking for in their next hire were adaptability, innovation, creativity and strategy. So, what has happened in reality? Martins says: “The survey was right, in that companies would seek leaders with breadth. Conversely many have focused on speciﬁc roles in areas deemed to be the key pillars of growth namely, customer insight, data, marketing and technology.”

ORESA provide organisational strategy, leadership consulting and headhunting services to the CEOs and Founders of companies seeking accelerated growth. Email Orlando.Martins@oresa.co.uk Phone +44 (0)20 3675 1459 www.oresa.co.uk Business Leader - Inspire • Inform • Connect

FEATURE

SKILLS, SKILLS, SKILLS

WITH REDUNDANCIES AND UNEMPLOYMENT RISING – WHICH SECTORS WILL BE LOOKING FOR SKILLS AND TALENT? BUSINESS LEADER INVESTIGATES

he unemployment rate in the UK grew to 4.1% in the three months to July 2020 – the highest levels of people out of work since the end of 2018. In August it was also revealed that the number of employees in the UK on payrolls were down 695,000, compared to the three months prior to the lockdown. So, what does the future hold for the UK workforce and what will be the growth areas of the economy that will be creating jobs and requiring talent?

Nerys Mutlow, Evangelist is the Chief Innovation Office at ServiceNow, says that the technology sector will be a key growth area for the UK economy : “The pandemic has highlighted huge resilience from the technology sector and as such, it’s a better time than ever to develop science, technology, engineering and maths (STEM) skills. Data skills will be in demand for the foreseeable future. "Businesses collect a huge amount of data from multiple sources, but to gain value, this data must be analysed and turned into actionable insights. Understanding how to use the technology that handles data is a particularly good skill to gain.” The highly tech-focused business world that now exists due to the crisis has been made

an immediate priority by firms in all sectors – as employees’ daily lives take a more digital-focus.

Rob Chapman - Firebrand Training

October 2020

EDUCATION

Robert Chapman, Co-founder of Firebrand Training, comments: “As organisations of every kind have rapidly shifted to a digital model in order to survive the pandemic, it has brought into focus the benefits that digital skills bring to everyone across the UK. The skills gap is still very much a reality for employers and upskilling employees cannot be disrupted at such a critical time.

August 2020 told us they thought COVID-19 is a good opportunity for staff to develop either management or general workplace skills.”

“By digital skills, I am firstly referring to basic technology skills, such as how to use digital tools like Zoom and cloud services, and cybersecurity awareness, to prevent mistakes being made that can put an entire organisation at risk. “Secondly, I am referring to more technical digital skills, the skills that enable you to build or fix these tools and systems that are more important than ever in ensuring our economy keeps on running. These skills are no longer just for the organisation’s tech department either, upskilling to have an understanding of basic code or how to be creative with data could enable people in many roles to make innovative changes to the way they and their department work, pushing towards an even more digitized and efficient future.” However, it is not just tech and digital skills that today’s business leaders need to equip their staff with and those looking for a new role, need to acquire.

Jason Greaves - Manpower

Post-furlough futures The employment market is at a crossroads, whereby urgent skills and talent are needed, but many industries are haemorrhaging money to just try and survive. But, as the world tries to move towards a vaccine and economic recovery, what new skills should people be trying to learn?

Jason Greaves, Manpower Brand Leader and Operations Director, comments: “One area we are increasingly seeing demand for skills is in IT, and we’re seeing new Mutlow continues: “Additionally, customer roles being created such as video platform service skills are always useful; it’s support specialists. Our reliance on digital important to know your customer in services in recent months has naturally whatever industry you may skyrocketed, and in many work in. Looking at output ways has accelerated through a customer’s THE PANDEMIC the trends of digitisation lens means businesses HAS HIGHLIGHTED HUGE we had seen prior to the will always deliver what is RESILIENCE FROM THE pandemic. As we continue needed at that time, be it through this health crisis, prior to the pandemic or TECHNOLOGY SECTOR building knowledge of as we navigate through it.” AND AS SUCH, IT’S A digital platforms can be Niamh Mulholland, BETTER TIME THAN invaluable not only in Director of External EVER TO DEVELOP helping prepare for the Affairs at CMI, said: future of work, but also SCIENCE, TECHNOLOGY, “At CMI, we suggest potentially to find a new ENGINEERING AND MATHS focusing on digital and role.” interpersonal skills as (STEM) SKILLS." Chapman concurs: “My well as management. Nerys Mutlow advice to those currently This powerhouse trio will out of work would be to support workers, both urgently upskill tech - this with pivoting to remote knowledge is massively in demand but there and digital business delivery, and support simply aren’t enough skilled people to fulfil themselves and their teams through that demand. Also, it is also not as hard these variable and uncertain times. This as people may think to re-skill or upskill in is endorsed by 73% of managers, who in Business Leader - Inspire • Inform • Connect

digital! With the right courses, as well as a pinch of determination, reskilling becomes a less daunting task. “Take coding as an example. The most in demand job in the world now is the Software Developer, including here in the UK. Coding really is the hottest and most in-demand skill and there are a huge amount of free resources to get people into it, including BBC Bitesize, as well as paid-for courses like LinkedIn Learning. But, while you may not expect it, apprenticeships are undoubtedly one of the best ways to reskill.” For those that have unfortunately lost their jobs, or their industry has been turned upside down – they will need to change careers. This provides an opportunity for themselves as well as business owners who can see the potential in cross-skilling. Mutlow comments: “The pandemic has completely changed the types of roles that are in demand, with many losing their jobs. But for those looking for a new career, retraining in an entirely different field costs both time and money. “Instead, both businesses and prospective employees should be looking at crossskilling: identifying areas that they could reapply their existing skills to different roles. This involves considering skills similar to those in demand rather than being a direct fit or looking at where employees could be moved from one area of the business to another with transferable capabilities. “For instance, a mechanical engineer with a mathematically driven mind could fit the bill and cross-skill as a data scientist, or someone who may have worked as a travel agent with great customer service skills could be hired to improve this area within financial services. The responsibility falls on businesses to leverage this accordingly, but for redundant or furloughed workers, crossskilling could be a good solution rather than having the pressure of learning entirely new skills in a short space of time.” For would be entrepreneurs – chaos brings opportunities – and for many, now could be the time to take a leap of faith and start their own business.

Cont.  53

FEATURE EDUCATION

Retail, tourism and manufacturing are just a few that have suffered – but what does the future hold for the workers and business owners in these sectors? Andy Moss, Managing Director, Corporate Learning at City & Guilds Group, comments: “With around four million people across the UK expected to be unemployed by the end of the year, it is vital to create a link between industries that are reducing their workforce and those sectors that are growing which require a similar skill set. Dr Richard Anderson - High Speed Training

Dr Richard Anderson, Head of Learning and Development at High Speed Training, said: “The teeth of a recession can actually be the ideal time for innovators and entrepreneurs to create and launch their own start-ups. Economic downturns have previously shown that new businesses can gain market opportunities and provide income for those struggling to secure their jobs – or who’ve actually lost them. The lockdown may provide an opportunity for homepreneurs to use their physical-distancing time to pick up a new skill or to create a business plan to launch an Etsy shop or consultancy from their kitchen table. "In the first six weeks of lockdown alone, High Speed Training saw a dramatic 61% increase in the number of people completing its Starting a Business course compared to the same period last year – a reassuring statistic that Brits are using their time to embark on new career adventures.”

"Indeed, whilst COVID-19 has had a devastating impact on the aviation industry and particular parts of the retail, hospitality and leisure sectors, in industries such as healthcare, digital and infrastructure, there exists an unprecedented demand for talent. “Mapping transferable skills potential and the agility of workers will be key to helping people move from one industry to another. Not only will this help displaced workers unlock new career paths, but it will also provide employers with access to a new pool of talented, industry-ready employees – encouraging further growth in these sectors.” It is the workers within the sectors that are struggling that should look to reskill in industries that are currently thriving during the pandemic.

Sector specific skills Despite the government’s introduction of the furlough scheme and various loans to keep businesses afloat, some industries were helpless in their demise due to the pandemic.

THE TEETH OF A RECESSION CAN ACTUALLY BE THE IDEAL TIME FOR INNOVATORS AND ENTREPRENEURS TO CREATE AND LAUNCH THEIR OWN START-UPS. ECONOMIC DOWNTURNS HAVE PREVIOUSLY SHOWN THAT NEW BUSINESSES CAN GAIN MARKET OPPORTUNITIES AND PROVIDE INCOME FOR THOSE STRUGGLING TO SECURE THEIR JOBS." Dr Richard Anderson 54

valuable to businesses in a wide range of sectors, it would be easy to imagine a pilot making a very competent EHS Manager for an organisation, or in a management position with the emergency services, ensuring risk is appropriately managed while retaining a capacity to handle an emergency incident. "Cabin crew have learned to deal with a huge range of people covering the full range of emotional situations, from joy to panic and fear. These human skills would be transferable into a vast array of roles, such as HR and public services.”

MAPPING TRANSFERABLE SKILLS POTENTIAL AND THE AGILITY OF WORKERS WILL BE KEY TO HELPING PEOPLE MOVE FROM ONE INDUSTRY TO ANOTHER. NOT ONLY WILL THIS HELP DISPLACED WORKERS UNLOCK NEW CAREER PATHS, BUT IT WILL ALSO PROVIDE EMPLOYERS WITH ACCESS TO A NEW POOL OF TALENTED, INDUSTRYREADY EMPLOYEES." Andy Moss The role of the educators In order for these industries to recover, or for the industries thriving – to teach new and existing staff the relevant skills – colleges, universities, apprenticeships and other education facilitators will be the cornerstone for driving economic growth as businesses move towards a post-COVID-19 world. Just like businesses – the educators will need to evolve with the times. The importance of these educators cannot be understated when looking at reskilling the workforce.

Nigel Morgan - HWGTA

Nigel Morgan, Chief Executive, HWGTA, said: “The collapse in the aviation industry would be an example of a sector needing to retrain in large numbers. Pilots would make exceptional process developers and managers as well as risk assessors. Having been so thoroughly trained in situational awareness and a capability to deliver in extreme pressure situations they would be

Mulholland concludes: “Educators cut through the noise and deliver expertise that will boost your business in ways that work for your people. Pursuing accredited qualifications, like those from Chartered bodies, has the additional benefit of hallmarking you and your people as the best in the business. Working with educators to pursue skills training and upskilling during this crisis should be seen as an investment, not as an expense.”

October 2020

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ADVERTORIAL

BUILDING THE FUTURE WORKFORCE DURING COVID I’m sure you’re reading this reflecting upon what has been a turbulent period during the pandemic. I’ve always said that people are the foundation of any business and we’ve seen a real collective effort from our team who continue to train our 30,000 learners and support our 2000 strong employer network, many of which employ apprentices. Like most businesses, we’ve experienced challenging times but we've seen the entrepreneurial spirit from our staff, who transformed our college online in March delivering over 4,000 online training sessions during the first week in lockdown, deliver outstanding support for our learners. Despite challenging times, employers still recognise skills as a key issue. The recent Open University Business Barometer report (August 2020) highlighted 56% of UK employers continue to experience skills shortages and 61% of employers say that they’re not as agile as they need to be because of skills shortages. Nationally, the number of apprentices being hired is down however Weston College is

Dave Crew Head of Business Growth and Employer Partnership, Business Growth

bucking the trend with a large number of new apprentices joining us recently. Businesses such as Future Stars Coaching have taken on apprentices to supports its growth plans during the pandemic. Ben Hazeldine, owner of Future Stars Coaching, said: “For the last seven years, we’ve taken on five apprentices each year to earn qualifications through practical and first-hand experience working at our 35 partner schools. This year, we’re working with five new apprentices who we feel have already made a positive impact despite only working with us for a short time. We’re keen to ensure that those who join us in September are not just here with us for a year. We want them to know that if they work to our high standards, we will happily find a role for them once they have finished their course and we encourage them to view sports coaching as a lifelong career. One of the first apprentices who trained with us through this programme is now on our Senior Management Team and going from strength to strength. Taking on apprentices has allowed the business to grow since we’re able to offer more services to our customers as we have a regular recruitment process thanks to the programme with Weston College.” We've also seen employers review their management infrastructure and explore funded training programmes. EPS Services and Tooling, a manufacturing business in Somerset, have accessed Weston College management training which as an SME, presents an affordable option as 95% of apprenticeship training fees are funded.

Nick Palmer Managing Director EPS Services and Tooling

Nick Palmer, Managing Director said: “One of our key company objectives is to develop our management talent for the future. Despite the current climate we needed to see beyond the immediate issues and look ahead. During lockdown I approached Weston College to access online leadership courses to give my staff the opportunity to develop their knowledge or managing people which proved successful. I’ve now asked the College to enrol two of my supervisors on a Leadership Apprenticeship, which will give them up to 18 months training through workshops and work-based assessments. For a small business the apprenticeship programme is a cost-effective tool to both develop our talent and motivate individual members of staff. This programme helps us illustrate that working for EPS is worth more than just monthly pay cheque.” Despite COVID-19 causing unimaginable disruption, I’ll say it again, great businesses have great people. Here at Weston College, we’re as committed as we’ve ever been to offering bespoke training and apprenticeships, delivering our mission of creating brighter futures. Visit our COVID-19 Recovery Hub to understand the options and funding available – www.weston.ac.uk/ covidrecovery October 2020

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LEADERSHIP

TOM CARTLEDGE: CEO IN FOCUS

om Cartledge is the CEO of Nottinghamshire and London-based international property design and real estate firm Handley House. He spoke to Business Leader Magazine about the history of the business, taking over the company from his father and what it takes to manage a global team.

who had seen the levels of UK activity and wanted to take that to Hong Kong and Dubai.

CAN YOU GIVE US AN OVERVIEW OF THE BUSINESS? Handley House is a family-owned company overseeing commercial advice and design expertise by four teams – Pragma, Benoy, Holmes Wood and Uncommon Land. Benoy is the oldest of our businesses, established in 1947 as a small, agricultural, architectural practice, based in Nottinghamshire.

When I joined, there was a clear message that there was now a succession plan in place. My approach has been different to Graham (who remains with the business as Chairman) and that is reflected by the diversity of the group’s skills, leadership and international growth.

My father, Graham Cartledge, joined Benoy as a young and energetic architect. He realised quite quickly that the future of design wasn’t in cow sheds in rural Nottinghamshire, but rather a more commercial and customer-led architectural design route. By the late 1980s, Benoy had established a reputation for retail and UK retail interventions in many major towns and cities. Following a period of ownership changes, Graham acquired sole ownership of the business and secured a mega retail project – the Bluewater Shopping Centre in Kent – and that really put the ‘new’ Benoy on the map. They became the go-to practice for UK retail. In the late 1990s, the business was then approached by an overseas company, 58

WHEN DID YOU JOIN THE BUSINESS? I arrived in the business in 2015. My personal background is in retail property and surveying – but not design. I was very fortunate to work as a board member, at a very young age, at an American retail business, known in the UK as TK Maxx, as their Head of Property. That gave me a huge insight into leadership.

WHAT DID YOU WANT TO CHANGE WHEN YOU JOINED? Following the strategic review in 2015, we looked at the powerful global machine that it had become. We still believed that the clients, who want to work with Benoy, wanted more from the company, but that it would not have been right to do it under the Benoy banner of leading international architectural design. So, over the last six years we established three new businesses alongside Benoy – graphics and wayfinding firm Holmes Wood, which was acquired, another which was a start-up landscape business named Uncommon Land, and more recently another acquisition of a data and analytics real estate business called Pragma. WHAT WAS IT LIKE WORKING WITH YOUR FATHER? CAN YOU TAKE ME THROUGH THE SUCCESSION PLANNING? One of the benefits, for me, was spending

15 years outside the business because I wasn’t coming in as a fresh, naïve business person – I joined as an experienced board member who had gone through the ups and downs of running parts of a major company. That gave me the internal and external credit that made me confident in my own ability. For the first three years of the succession, me and Graham were working out the best way to react to the changes – but during that time we worked out a plan. He is an insightful and knowledgeable chairman, who lets me run the business. However, he is always there for advice and support. He has a vast knowledge of October 2020

CEO IN FOCUS

LEADERSHIP MUST ADAPT IF YOU ARE DEALING WITH DIFFERENT COUNTRIES AND TIME ZONES. BUT NO MATTER WHERE YOUR TEAM ARE, YOU NEED TO GIVE THEM SPACE AND RESPONSIBILITY BUT AT THE SAME TIME DIRECT EVERYONE TO THE SAME COMMON GOAL."

the business and wider industry, which is so valuable to me as the leader of the company. My advice to anyone going through a family succession is listen and learn from others who have gone through the process, as you only have one shot at getting it right. WHAT ADVICE WOULD YOU GIVE TO SOMEONE GOING THROUGH A SUCCESSION PLANNING PROCESS? It is unique to each individual business but there needs to be an understanding of what that new leaders’ job description is going to be. Getting advice from a great HR person to map out the succession and the new role, with what the company expects Business Leader - Inspire • Inform • Connect

from them once they take up the job, is vital. There must be a shift in behaviour as a result of the succession, and it will put a strain on a personal relationship, as you are going from a non-business relationship to a high-pressure work environment. You need to plan whether the changes will be just for one person at the top or will there need to be others within the organisation. What Graham allowed me to do was put a group of people around myself who knew how I worked – which is very different to my father. HOW WOULD YOU DESCRIBE YOUR LEADERSHIP STYLE? As the CEO, I believe my role is to mentor

and guide – not necessarily to get directly involved in the processes. However, as the leader, you do need to know when you need to step in. My leadership team would say that I give them space to take responsibility – but that I have a very good memory and attention to detail to help them at any moment, so we do not miss out on the bigger picture. You need to give others responsibilities to complete, but you need to constantly manage those – it is a constant narrative around strategy.

Cont.  59

INTERVIEW

CEO IN FOCUS

Benoy project Parc Central, Guangzhou, China

MY ADVICE TO ANYONE GOING THROUGH A FAMILY SUCCESSION IS LISTEN AND LEARN FROM OTHERS WHO HAVE GONE THROUGH THE PROCESS, AS YOU ONLY HAVE ONE SHOT AT GETTING IT RIGHT."

Managing remote teams is different as we have teams all over the world. Their jobs are different, their hours are different, their culture is very different and so you cannot have the same approach to all on your management team. You need to have a structure and be conscious of many other factors. Leadership must adapt if you are dealing with different countries and time zones. But no matter where your team are, you need to give them space and responsibility but at the same time direct everyone to the same common goal that is driving who we are as a business. CAN YOU TAKE ME THROUGH YOUR ACQUISITIONS AND WHAT THEY HAVE MEANT TO THE BUSINESS? Benoy has traditionally grown and entered new markets organically. To expand the group, we have always taken the view that if there is an opportunity to buy a business, it should be a specialist in its field and small enough that we could (quickly) take it overseas. Holmes Wood was our first acquisition. They are wayfinding specialists who help people to navigate and experience the world around them, so it provided a nice synergy with architecture and interior design. Pragma, our most recent acquisition, provide commercial advice and strategic research for investors and operators – they are at the beginning of many real estate journeys for clients. Our fourth business, Uncommon Land, wasn’t an acquisition but was set-up by the group to provide landscape expertise.

(L-R) Qing Pang Head of Benoy's Shanghai studio with Tom Cartledge and Chairman Graham Cartledge CBE

October 2020

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TOP 32

E DER MAGAZIN A E L S S E IN S BY BU

t is no secret that the retail sector has been devastated by the impact of COVID-19. However, through the well-publicised struggles of the high street, there have been many examples of the importance, rise and success of eCommerce and online retail firms. As a result, Business Leader Magazine have highlighted 32 businesses – and their leaders – who are the driving forces behind this area of the sector. Whether they are established leaders, disruptors and innovators, or have exploded in popularity in recent months – these are the companies to look out for. We are aware that there are thousands of examples of companies and individuals within the online retail industry – and we encourage you to send in your nominations for the online version of this list, which will appear on www.businessleader.co.uk. Please email editor@businessleader.co.uk. This list is in no particular order.

ALAN BARRATT GRENADE Online sales for sports nutrition firm Grenade are up 294%, as the company experiences its best year of eCommerce sales to date - having already surpassed 2019 sales. Founded in 2009, the business is a leader within the global healthy snack market – valued at £25.4bn – and Grenade has been experiencing double-digit yearon-year growth over the last three years. Already exporting to over 100 countries, Grenade is preparing expand into Australia, Germany, Belgium, Switzerland and Scandinavia.

Dame Sharon White John Lewis Partnership

JOHN ROBERTS

DAME SHARON WHITE

AO WORLD

JOHN LEWIS PARTNERSHIP

Following months of growth due to the increased number of online shoppers, AO World announced plans to create 650 jobs as part of a new recruitment drive. The new employees will help the company manage the sustained increase in demand seen in recent months. The Bolton-based digitalonly retailer was founded in 2000 and has grown to employ around 3,000 employees across the UK.

In February this year, just a month before the lockdown, Dame White took over the role of Chair at the John Lewis Partnership – after a successful career at Ofcom and the government. She has taken on the tough task of guiding the struggling retail giant through the crisis, following an already tumultuous time of declining profits and senior departures. White has a plan to save the retailer through innovative plans. October 2020

RETAIL LEADERS

NICK PRESTON & MARK WASLEY

DOMINIC PAUL

MUSCLEFOOD

DOMINO’S UK

Food retailer musclefood recently appointed joint CEOs to take the business to the next stage of its growth. Former Commercial Director Nick Preston and ex-Sofology CFO and COO Mark Wasley have taken the helm at the company. At the height of lockdown in March, musclefood delivered over 135,000 orders, selling 125,000kg of premium chicken breasts with website visits up to 2.3 million. In April/May, they saw the volume of customers compared to the same time last year increase by 124%, with repeat customers up by 35%.

Domino's Pizza has this month announced that it will be employing an additional 5,000 staff following the surge in online sales for takeaway meals during the coronavirus crisis. The chain saw a 5% jump in sales over the first half of its financial year as people looked online more than ever for food delivery.

period, they will be employing 1,000 new staff members to deal with the surge in demand during the first few months of the outbreak. Year-on-year online sales at Gousto have more than doubled over the last twelve months, with much of the recent growth attributed to changing eating habits of the public during the lockdown.

TIMO BOLDT GOUSTO Healthy food delivery firm Gousto announced in early August that, as a result in an explosion in sales during the lockdown

Jacqueline Gold CBE Ann Summers

JACQUELINE GOLD CBE ANN SUMMERS Regularly noted as one of the country’s most important retail leaders, Gold has been at the helm of the company since 1993. Having avoided the fate of its US rival, Victoria’s Secret, under the guidance of Gold, the firm looks set to recover and thrive as the world looks to move through COVID-19. Gold announced in September that the company would be putting more money into the company to guide through the coming months. Nick Preston & Mark Wasley Musclefood

ANYA HINDMARCH CBE EPONYMOUS Hindmarch is a fashion accessory designer who rose to prominence through her Eponymous retail brand. After leaving the company in 2011, she regained coownership last year – and has helped grow the brand into an international eCommerce and retail icon.

John Roberts AO World

Dominic Paul Domino's Pizza

Cont.  Business Leader - Inspire • Inform • Connect

TOP 32 JAMES WATT BREWDOG Unicorn business and a leader within the craft beer industry, BrewDog has seen its revenues for the first half year of trading increase by 55% to £78m. The Scottish firm’s iconic Punk IPA drink is one of five top selling craft beers during the lockdown period. Since March, BrewDog has experienced UK retail sales growth of 83%.

BEN FRANCIS GYMSHARK The UK’s newest unicorn business – after achieving the status in August – Gymshark has been one of the fastest rising eCommerce firms for many years. However, the lockdown has seen the company expand to reach new heights. The sports fashion retailer announced in July this year that it had achieved annual revenues of £258m – up from £176m the previous year. Ben Francis GymShark

DAME NATALIE MASSENET FARFETCH Co-chair of online luxury retailer Farfetch, Massenet has had a storied history within the eComerce fashion sector. She founded Net-a-porter from her Chelsea flat in 2000, and grew it into an international firm. She received her Damehood for services to the fashion industry and has been Chair of the British Fashion Council.

GUY SINGTH-WATSON RIVERFORD Dame Natalie Massenet Farfetch

Organic vegetable box delivery service Riverford, which also offers vegan and vegetarian recipe boxes, has seen exponential growth in its deliveries as the public looked for alternatives ways of receiving fresh vegetables. The firm actually had to halt orders as demand surged to a point where it put a ‘huge strain’ on the business – sending out more than 55,000 deliveries a week. The company has made plans for investment to help the company manage its incredible growth.

Laurent Guillemain Hellofresh

James Watt BrewDog

LAURENT GUILLEMAIN HELLOFRESH

Melanie Smith Ocado

Maria Raga Depop

During the first three months of the lockdown, the world’s most popular meal-kit delivery service saw its quarterly revenues rise by 69% to more than £630m, when compared to the previous year in the same time period. To meet the demand in the UK, they announced plans to double its UK workforce by offering 400 new jobs to pick October 2020

RETAIL LEADERS

Helena Helmersson H&M Group

Nick Beighton ASOS

and pack orders during its busiest ever period.

MELANIE SMITH

JULIA STRAUS

OCADO

SWEATY BETTY

NICK BEIGHTON

Online grocery retailer Ocado has reported a sizeable rise in revenue during the third quarter of the year, as the public made a dramatic shift to eCommerce during the COVID-19 enforced lockdown. Retail revenue rose 52% to £587.3m in the third quarter (which ended on August 30 2020).

The London-based women’s activewear firm promoted Strauss to the role of Chief Executive last year, having joined the firm from US beauty brand Tula in 2018. Strauss has been credited with the company’s digital and international growth. Due to the increased demand for running, yoga and sports apparel, the firm has seen a rise in popularity in recent months.

ASOS Fashion eCommerce giant ASOS saw its sales rise during the COVID-19 lockdown to unprecedented levels. The firm recorded a 10% increase in group revenue to £1bn for the four months to June 30. Overall sales in the UK during the same time-period hit £329.2m. At the start of the lockdown ASOS saw sales drop by a fifth, however, sales picked up in April, May and June, driven by a rapid growth in the rise in the need for ‘casual clothes’.

HELENA HELMERSSON

The group also said the customer reaction to the switch over to Marks & Spencer (M&S) from Waitrose products on September 1 has been positive for sales numbers.

MARIA RAGA

H&M GROUP

DEPOP

As the leader of the world’s second biggest fashion retailer, Helmersson has risen through the ranks at the firm to take over the top role in January this year. Helmersson is now leading the company’s transition away from bricks and mortar to online shopping. The firm have announced that it will be accelerating investment into its digital platforms to cope with increasing demand.

Raga has been the CEO of the app-based fashion retailer since 2016. The firm focuses on ‘preloved’ and vintage styles that allows users to buy and sell items online. The marketplace has risen to global popularity over the years for being inclusive, diverse and less wasteful – and during the pandemic, fashion resellers have seen a sharp rise in popularity as people clear out their wardrobes of old and unwanted items.

Business Leader - Inspire • Inform • Connect

SIMON ROBERTS SAINSBURYS AND ARGOS Sainsbury’s reported double digit sales growth year-on-year in grocery for the 16 weeks to June 27, with group online sales (including Argos) more than doubling. Online grocery sales soared by 87% yearon-year, with orders fulfilled per week increasing from around 370,000 to more than 650,000. Nearly 50% of new online grocery customers during the period were new Sainsbury’s shoppers. Digital Argos sales also increased by 10.7%, with home delivery sales up by 78% and 'click & collect' up 53%. Cont.  65

TOP 32 HENRY BIRCH THE VERY GROUP Liverpool-based online and app retailer Very.co.uk experienced a 65% increase in traffic during the pandemic – and as a result, annual group revenues exceeded £2bn for the first time. The number of new customers increased by 100% and their credit services increase by 80%. During lockdown, the business enabled all 800 contact centre colleagues and over 1,000 head office colleagues to work from home to cope with the increased demand.

TONY LAITHWAITE LAITHWAITE’S WINE During the lockdown, the public sought out new ways to receive their favourite alcoholic beverages. Family-run wine delivery business Laithwaite's Wine has seen a 300% rise in new customers year-on-year in March and April. The Gloucester-based firm is now the UK's top online destination for buying wine online.

revenues to more than £900m, as the British public were unable to dine out during the first few months of the lockdown. Orders during the year have increased by 32%, with more than 272 million deliveries made to date. The firm now has a record number of restaurants using the platform and more customers than ever before.

IAN WHITTINGHAM SIGMA SPORTS Premium cycling and multisport eCommerce retailer Sigma Sports reported a staggering 677% increase in sales of entry-level bikes by UK customers, when compared to the previous year. Mid-level bikes rose by 130%. Year-on-year growth for their range of trainers was up 997%. As the public made a shift to healthier living, the London-based firm has seen a mass surge in interest in many of their goods.

JOHN LYTTLE BOOHOO The first financial quarter of 2020, the online fashion retailer Boohoo reported stronger than expected growth during the coronavirus pandemic – a stark comparison to many of its rivals. The company reported a 45% leap in sales to £368m during the three months to May 31. Boohoo are so confident in their ability to weather the COVID-19 storm, they are forecasting revenue growth of approximately 25% for the current financial year to February 2021.

MATTHEW MOULDING THE HUT GROUP Following months of growth in their eCommerce platform, the health, wellbeing, beauty and nutrition retailer made the largest market debut on the London Stock

JOHN FOLEY PELOTON Throughout the COVID-19 pandemic, it has been widely reported that people are turning their attention to improving their health, wellbeing and fitness – and one of the most successful companies within this industry over the last few months has been Peloton – a high tech fitness firm that utilises fitness equipment mixed with a monthly subscription for training purposes. The company saw a 66% increase in users and posted its best financial figures to date – and as a result, the company is now valued at more than £3bn.

JAMES MCMASTER HUEL Featured in last month’s ‘Fast Track’ feature in Business Leader Magazine, Huel have experienced exponential and unparalleled growth within the complete food market. At the height of the pandemic, the company announced a 43% increase in year-onyear revenues to £72m. The company now exports to over 100 countries with international sales accounting for 56% of total sales.

Niraj Shah Wayfair John Foley Peleton

PETER DUFFY JUST EAT TAKEAWAY.COM The international takeaway delivery firm recorded a 44% increase in year-on-year 66

James McMaster Huel

October 2020

RETAIL LEADERS Anne Pitcher Selfridges

Angus Thirlwell Hotel Chocolate

Alannah Weston Selfridges

Exchange (LSE) for five years. The company is now valued at more than £5.4bn. The company also donated £10m in aid to local key and emergency workers across the Greater Manchester region to help deal with the COVID-19 outbreak.

ANGUS THIRLWELL HOTEL CHOCOLATE The Royston-based luxury chocolatier will be creating 200 new jobs in its chocolatemaking factory and distribution centre following a surge in online sales during the coronavirus crisis. Digital sales soared by more than 200% in year-on-year growth in the quarter to June 30, as shoppers bought Easter and Mother’s Day gifts online. Sales subscriptions in the same time period also grew by 47%.

ALANNAH WESTON & ANNE PITCHER SELFRIDGES Weston (Chairman) and Pitcher (Group Managing Director) are trying to steer the fashion retail giant away from the many struggles felt by the majority of firms within the sector. They have led the recent trend of

Business Leader - Inspire • Inform • Connect

offering clothing rental – which is set to see a rise in popularity over the next few years.

alongside a snack and its own magazine.

NIRAJ SHAH

HALFORDS

WAYFAIR

The UK’s largest cycling retailer posted financial results for the 13 weeks to July 3, showing a 57.1% like-for-like growth in cycling sales. The coronavirus pandemic was a key driver of the growth, with the British public turning to two wheels for exercise and transport to work, in order to avoid public transport. Growth in sales of bicycles increased a further 71% in August.

Global online homeware retailer Wayfair recorded year-over-year revenue growth of almost 20% – totalling £1.8bn. The firm put the growth down to increased demand in the COVID-19 pandemic, receiving orders from millions of new customers stuck at home due to the lockdowns. The eCommerce-only retailer also saw a 28.6% year-on-year increase in active customers to 21.1 million.

FRASER DOHERTY & JAMES BROWN BEER52 Edinburgh-based craft-beer subscription company Beer52 doubled its customer base to more than 200,000 people and increased its staff numbers from 31 to 71 during the height of the coronavirus lockdown. The firm delivers a selection of beers from a specific country or region each month

GRAHAM STAPLETON

KEN MURPHY TESCO Supermarket giant Tesco saw its sales rise by 8% to £13.4bn in the three months leading up to the end of May, and had to expand its online groceries business to meet the growing demand during the lockdown period by doubling its online capacity over a five-week period. Tesco experienced a 48.5% jump in online sales for the period, with online sales soaring by more than 90% in May alone. Former CEO Dave Lewis was replaced by Ken Murphy at the end of September. 

REGIONAL REVIEW

Can London’s hospitality sector recover?

he coronavirus pandemic has devastated many sectors across the world – and none more so than the leisure, tourism and hospitality industries – all of which rely on footfall and inperson experiences. With the COVID19-enforced lockdown pushing many businesses within this sector to the brink of existence, many have – or are about to – reach a point of no return. However, with lockdown restrictions now relaxed, government loans available and the general public now returning to some semblance of normality – there is cause for optimism. Business Leader brought together some leading experts to discuss if the capital can recover.

WHAT HAS BEEN THE IMPACT OF COVID-19 ON LONDON’S LEISURE AND TOURISM SECTOR? Coghill: “Lockdown caused an immediate, and in some cases almost total, end to the turnover of the leisure and tourism sectors. Not only this, but London’s complex and specialised supply chain took a sudden hit. In my own borough of Waltham Forest, there is a laundry firm focused on the hotel trade, which saw their business disappear entirely. This was seen across the breadth of London, from event lighting specialists to

catering firms. Often, as these businesses were not registered as hospitality businesses, they were not eligible to access grants or business rates relief, causing further devastation to their finances.” Morgan: “Walking through Covent Garden recently was a whole new experience. Many of the restaurants and all the theatres are shuttered. Hardly anyone is on the streets. This is one of the major impacts from COVID-19 on London’s domestic and international tourism and leisure sectors. With all tourism and leisure venues being October 2020

LONDON

Cllr Clare Coghill Executive member for Business, Europe and Good Growth – London Councils

Dr James Morgan Principal Lecturer in Tourism and Events – University of Westminster

"They have all lost out. Hotels have suffered losses due to the reduced number of international tourism arrivals and less domestic tourism into London. Whilst domestic tourism has mainly supported London hospitality businesses and with the re-opening of cinemas and museums in July, tourism and leisure choices for visitors have increased. "However, the main tourism and leisure superstructure that includes theatre, live music venues, consumer and business event venues that rely of tickets sales, venue hire, and their bar and hospitality sales have had to try and survive with their doors closed.” Simpson: “Like every other destination in the world, the pandemic has had a major impact on London’s economy as a whole, and the leisure and tourism sectors have been particularly hard hit.

closed in March, many businesses have had to survive with next to no income. Whilst government support packages have been forthcoming, for the tourism and leisure sectors, which include consumer and business events and hospitality, it will only be in October when the full picture of the impact can be judged, due to the furlough scheme coming to an end on 31 October. “Covent Garden’s theatres need to have capacities of at least 80% to be profitable, this is much the same for music venues.

Business Leader - Inspire • Inform • Connect

“Currently, Visit Britain anticipates a 79% decline in international visitor spend and a 49% decline in domestic visitor spend. When you consider the fact that tourism is worth £18.7bn to the London economy and that one in five Londoners works in the hospitality, retail, events and tourism sectors, it’s obvious that COVID-19 is having a huge impact on London’s leisure industry.” Santamaria: “We are in danger of a real loss in skills, similar to the one we saw during the 2007/2008 financial crisis. Restaurants and bars are having to watch every hour of payroll, cancel staff

Allen Simpson Director of Strategy and Corporate Affairs – London & Partners

trainings, combine positions, give additional responsibility to their staff, effectively resulting in over promoting. “We are having to accept lowered standards due to reduced staff. Realistically, positions such as hosts, barback and junior managers are key positions, but a restaurant can operate without them for a short while. The guest experience will be affected, waiting times increase and staff stress level may increase but the business will still run. While service standards are getting lower, menus are getting shorter in order to reduce kitchen headcounts. The overall skill level and quality base line is dropping.” CAN THE SECTOR RECOVER? IF SO, HOW? Coghill: “I am always amazed by the enterprising spirit of London’s business owners.xWe’ve seen restaurant catering firms reinvent themselves to provide home deliveries, as well as tour guides giving online virtual tours in New York time for American Beatles fans. “But London, especially central London, faces a unique set of challenges. Tourists do not typically drive into central London and there is an understandable reluctance to return to public transport. International tourism has largely disappeared and even the most optimistic predictions do not see any scale of return much before summer 2021.

Cont.  69

REGIONAL REVIEW

In addition, with the success of working from home for many firms, there is no rush back into the office, which means much less lunchtime and evening spending by office workers.” Morgan: “In the absence of a vaccine and taking the example of the Eat Out to Help Out scheme, we are starting to see the emergence of a similar scheme being proposed. Meet Out to Help Out has been launched by the business events industry and similar schemes relating to theatre, live music and other leisure pursuits could be developed. "Another area that is important is research. Notably, the UK government has opted out of an European Union (EU) initiative to pool research in this area. This is a grave mistake, where government has ignored the power of collective intelligence in extraordinary times.

EAT OUT TO HELP WAS A GREAT SUCCESS AND WE WOULD URGE NATIONAL GOVERNMENT TO LOOK AT RUNNING SOMETHING SIMILAR AGAIN, WORKING WITH THE INDUSTRY TO FIND THE RIGHT FORMAT THAT WILL HAVE THE BIGGEST IMPACT." Cllr Clare Coghill

"Whilst the government has put the social distancing pilots on hold, the data from the research undertaken and the results of the pilot schemes need to be collated at pace, and alongside European research to inform government policy that balances a recovery process in tourism and leisure provision against the risks of opening up the economy, whilst the threat of COVID-19 exists.” Pascual: “Of course, the sector can recover, and that will happen when the public regains the confidence to travel regularly. For that to happen a coronavirus vaccine seems essential, and luckily the latest news is that this may become a reality towards the end of this year. "Once a large part of the population has been vaccinated, I think people will continue to travel just as before: the same routes, destinations and activities. At Civitatis, we don't for a second think that the British Museum, London Eye, or Tower of London will remain empty once the situation has normalised.” WHAT CAN LOCAL AND NATIONAL GOVERNMENT DO TO HELP? Coghill: “There are a range of examples across London where a proactive approach to road closures has allowed restaurants and cafes to rapidly increase outdoor seating and their number of covers. Boroughs will continue to work on initiatives like this to help businesses.

“Eat Out to Help was a great success and we would urge national government to look at running something similar again, working with the industry to find the right format that will have the biggest impact. I know similar initiatives are being promoted by theatres and other venues and this needs serious consideration. "Boroughs are urging the government to retain elements of the job support scheme to support those sectors hardest hit and continue focused business rates holidays beyond March 2021.”

Alberto Gutiérrez Pascual Founder and CEO Civitatis

Alexandre Santamaria Founder Aware Hospitality

Morgan: “Some action has been taken already. For example, the government launched a £1.57bn fund to support the arts, cultural and heritage organisations, but it is questionable if cash-strapped small venues, independent support businesses and the self-employed can withstand the negative financial impacts. October 2020

LONDON

"However, some London councils have been supporting culture and leisure providers through top-up payments for furloughed staff, deferring management and other fees, providing rate relief and extending timescales for the repayment of loans. But more is needed to support the tourism and leisure superstructure. "This is in terms of targeting specific support packages to maintain London’s tourism and leisure facilities. For example, over 100 small independent theatres in London are asking government for just £9m to stay afloat. "Small businesses like this find it hard to attract investment and often don’t have the management expertise and capability to deal with the extraordinary. Many of these businesses and supporting selfemployed workers were not covered by the government schemes either. The Business Leader - Inspire • Inform • Connect

impact of little support for these small tourist and leisure organisations means a reduction in the capacity of London’s modern and traditional tourism and leisure superstructure built up over centuries will be lost to an extent. "This means a reduction in choice for both domestic and international visitors. There is a strong possibility that many of these centres of innovation and creativity will cease to exist.” WHAT SUBSECTORS OF LEISURE AND TOURISM HAVE BEEN THE WORST AFFECTED? Morgan: “Theatre, live music performance, consumer and business events have been the worst affected. The predicted start of the businesses in these sectors, pencilled in for October 1, has been thwarted by the September surge in COVID-19 cases. For

example, indoor consumer and business events that were postponed earlier in the year, or events that were planned to run from the beginning of October, have been put on hold. Dozens of small independent off-West End performance spaces that planned to re-open in October, are now under imminent threat of permanent closure. "But due to the success of Eat Out to Help Out, the hospitality industry in London, especially in the suburbs, has seen an uptick in economic prospects. However, businesses in tourist hotspots such as Covent Garden are suffering due to their operations being part of leisure and tourism clusters that feed off each other and they all rely on both international and domestic tourism spend. Cont.  71

REGIONAL REVIEW

"A prime example is theatre-goers going to restaurants in the area before a show.” Simpson: “For the hospitality and retail sectors, things have been more difficult. The balance between keeping visitors safe and making sure we are open for business is a delicate one. For example, quarantine rules are having a big impact on hotels, with occupancy down 75% from July last year to less than a quarter in the same month this year. “On the retail front, flexible working means a lot of office workers are still working from home, and this is having big consequences for retailers, particularly in central London. Statistics from last August showed that overall footfall was only 28% of prepandemic level. “Culture is another sector that has really suffered and is having to make big changes to adapt. As well as ‘standard’ safety measures, such as wearing masks and social distancing, museums are introducing mandatory pre-bookings with timed tickets, as well as capping visitor numbers, much like other historical attractions such as the Tower of London. This means that while much of the cultural sector has been able to reopen, it is under real financial strain.” Pascual: “Up until now one of the subsectors which has been worst hit by the current situation has been nightlife, for the theoretical difficulties in implementing the same security measures compared to other activities. In general, any kind of activity that implicates a certain capacity, and which now has to be reduced, will be far more affected than those activities taking place in the open air, such as a free tour of London.”

I WOULD PERSONALLY INVEST IN TWO MODELS IN UK. FOOD DELIVERY BRANDS AND EXPERIENTIAL DINING/ PARTY DINING. THE RATIONALE BEHIND THAT IS THAT PEOPLE ARE STAYING AT HOME MORE THAN EVER AND THE DELIVERY OFFER HAS NEVER BEEN SO GREAT." Alberto Gutiérrez Pascual

Santamaria: “High end of course, for several reasons. First of all, because of financial uncertainty which leads to people not spending as much. Also, the loss of a key segment that is the international business clientele entertaining on business lunches. Then the lack of adaptability high end restaurants often have. High end operators are often more emotionally involved and find it hard to compromise on the variety of their offer, quality of service and other aspects.” WITH LOCKDOWN RESTRICTIONS LIFTED – WHAT DOES THE FUTURE HOLD FOR THE SECTOR IN LONDON? Morgan: “The structural integrity of tourism and leisure provision is under threat, even if lockdown is lifted and a vaccine is found. From a supply-side point of view, businesses have closed, under investment is rife and many of the skilled workers in the tourism and leisure sector are unemployed. From the demand-side, the anticipated new wave of job losses as a result of the furlough scheme coming to an end questions the availability of disposable income that can be spent by domestic tourists. "This may be compounded by the fact that the autumn tourism season sees fewer international arrivals in any case, so London’s tourism and leisure sectors need to brace for further job losses. This will lead to under use of venues, hotels and supporting businesses, leading to more business closures and a general tightening of belts by both domestic and international consumers, impacting London’s tourism and leisure economy.” Simpson: “London has so much to offer to visitors from the UK and from all over the world, and that appeal isn’t going anywhere. Visitors will be back. But there is

LONDON

LONDON HAS SO MUCH TO OFFER TO VISITORS FROM THE UK AND FROM ALL OVER THE WORLD, AND THAT APPEAL ISN’T GOING ANYWHERE. VISITORS WILL BE BACK." Allen Simpson

no denying that the capital’s tourism sector, and indeed global tourism, is going through a crisis. “While this is a terrible situation that no one could have anticipated, we need to use this time to reappraise what we want tourism to mean for our city. We need to prepare for the return of visitors, while ensuring we rebuild in a more sustainable way, spreading the benefit of tourism to the whole city, and to all Londoners, while rising to global challenges such as climate change.” Santamaria: “I would personally invest in two models in UK. Food delivery brands and experiential dining/party dining. The rationale behind that is that people are staying at home more than ever and the delivery offer has never been so great in terms of variety and quality. If they are not going to stay at home, they will want more than just food and we should focus on creating multi-dimensional concepts that encompass music and party atmosphere. This is an exciting opportunity for creativity and could be chance for the more agile business to spread their wings.” October 2020

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