Businesses in the hospitality, tourism and retail sectors are holding out for COVID-19 restrictions to lift, as a majority of turnaround professionals believe these businesses won’t be able to survive more than three months if the shutdown continues.
Businesses in the hospitality, tourism and retail sectors are holding out for COVID-19 restrictions to lift, with a majority of turnaround professionals of the belief these businesses won’t be able to survive more than three months if the shutdown continues.
A national survey from KordaMentha and the Turnaround Management Association of Australia surveyed 300 corporate renewal professionals, lawyers and lenders were asked about the impact of COVID-19 on Australian businesses.
The survey found other vulnerable industries included education, real estate and manufacturing, where 80 per cent of practitioners believed companies could last more than six months.
Some industries, including food and agriculture and media and telecommunications, received mixed responses.
One third of respondents expected food and agriculture to be negatively impacted over the next 12 months but one third believed it would be positively impacted.
In the media communications sector, half expected a negative impact but a third expected a positive result.
Actions businesses have taken to survive the next three to six months include stopping recruitment (62 per cent), stopping investment (50 per cent), forcing staff to take leave (46 per cent) and redundancies (37 per cent).
To ensure businesses survive, 89 per cent said customer patronage was significant, 81 per cent said access to working capital was important, and 72 per cent said functioning supply chains were needed.
Many predict Australia’s economic recovery to be U-shaped (58 per cent), 32 per cent believed it would be W-shaped, and 10 per cent said it would be V-shaped.
Most respondents said the commonwealth and state governments had done enough to support Australian businesses in response to COVID-19, with only 13 per cent of people suggesting enough hadn’t been done.
Just over half of respondents (54 per cent), said further government support and stimulus would be required.
According to the federal government this week, 67,680 WA businesses have enrolled in JobKeeper so far.
Vantage Performance principal Andrew Birch said JobKeeper was a good initiative to keep people in work and he was seeing it working effectively with clients.
“There will be some companies for whom it provides limited benefit, such as companies employing short-term casuals, which has been identified by the government,” he said.
Mr Birch said eligibility rules were difficult to understand and had been evolving because a few companies had sought to adjust their circumstances to become eligible, and the government responded by tightening loopholes.
“However, most companies should be able to work through the eligibility criteria themselves, or speak to their accountants or advisers," he said.
However, Mr Birch did say the timing of the initiative could be improved.
“Some companies have had to advance wages up to a month before receiving the benefit, which has created a working capital risk that’s resulted in some of those companies deciding it would be better to just stand-down the staff,” he said.
A quarter of respondents believed businesses were not prepared to ramp-up once social distancing restrictions were lifted, and 60 per cent were somewhat prepared.
Clayton Utz partner and Turnaround Management Association of Australia chair, Cameron Belyea, said now is the time to plan for restrictions being lifted.
“If you look at it on a sectoral basis, you would see the hospitality industry, particularly dine-in places, are going to face reduced capacity constraints on their businesses for some time,” he said.
Mr Belyea said hospitality businesses would have to figure out how to match labour requirements to a reduced number of tables in-house while offering a take-away option as well.
“I don’t think that’s been systematically thought through by some of the businesses that we have spoken to," he said.
“I think what the survey is really saying is, now is the time for businesses to start planning for the restrictions being eased.”
Those surveyed believe some industries, including retail and consumer services, hospitality, tourism and education, would have permanently different business models following COVID-19.
Across all businesses, 93 per cent of respondents believed more people will work from home and use video conferencing more, 76 per cent said businesses will continue to have a greater reliance on diversified and domestic supply chains and 68 per cent suggested there will be an increased focus on domestic rather than overseas tourism.
Just over 60 per cent of respondents say debt or equity financing for recovering businesses will be worse over the next 12 months.
