The UK is adapting to COVID-19, with defensive cost-cutting its main strategy

Business optimism has declined sharply in the UK, and businesses’ expectations of revenue growth in the next year are lower than in 2019.

The drop – which is broadly in line with Europe – is led mainly by businesses in the North West, one of the regions hardest hit by COVID-19-related restrictions.

However, seven in ten UK businesses expect to have returned to pre-COVID levels of profitability by the end of 2022 and a fifth by the end of this year.

The resurgence of COVID-19 is the primary concern for growth and recovery. More positively, it’s also the biggest driver of sales growth. Unlike the global picture, but in line with Europe, defensive cost-cutting will be the predominant strategy of UK businesses when dealing with either scenario.

71 %

of businesses expect to return to pre-COVID growth levels by the end of 2022

Top 3 drivers of business growth

  1. 1

    Impact of COVID-19

  2. 2

    Growth in domestic demand

  3. 3

    Introduction of new products & services

When businesses expect to return to pre-COVID levels of profitability

Already ahead of our pre COVID levels % End of 2020 to 2022 % 2023 to 2025 %
Spain 5 74 20
Russia 5 77 16
France 7 72 20
Belgium 7 62 26
UK 8 71 19
Greece 9 66 19
Germany 10 65 21
Italy 10 78 11
Netherlands 11 69 17
Ireland 13 62 24
Poland 13 68 19
Sweden 14 58 27
Switzerland 14 66 17

How business outlook has changed in the last 12 months*

More pessimistic % More optimistic or expect to stay the same %
UK 2019 16 83
UK 2020 38 61
APAC 2019 20 80
APAC 2020 32 68
Europe 2019 20 79
Europe 2020 36 62
North America 2019 12 88
North America 2020 26 73
South America 2019 13 86
South America 2020 18 80
MENAT 2019 15 85
MENAT 2020 22 77
Rest of Africa 2019 18 82
Rest of Africa 2020 32 67

*Excludes businesses answering 'Don't know'

UK businesses are still investing to grow

In line with globally, the events of 2020 have not dampened the inclination of most UK businesses to invest to grow. Slightly more than three in five intend to increase investment in the next year.

More than half identify employee wellbeing (55%) and the customer experience (53%) as investment priorities in 2021, above the global average. Increasing cash flow/capital management, cyber security and data protection are the next highest priorities. This suggests UK businesses are taking a well-balanced approach by investing across important parts of their business. To enable this, they intend to invest in technologies that help customer targeting/experience and improve speed to market.

Strategies of UK businesses to benefit from growth drivers and address threats

  1. 1

    Cut costs

  2. 2

    Invest in the customer experience

  3. 3

    Invest in the workforce / employee wellbeing

  4. 4

    Make changes to supply chain to make it more resilient

  5. 5

    Improve the quality of their products / services

62 %

of UK businesses intend to increase investment in their business in the next year, despite the challenging environment