UK’s smallest businesses fight to survive the coronavirus crisis

A low-rise building in a trendy part of east London bears testament to the far-reaching impact of the coronavirus crisis on the UK’s smallest companies.

The building’s central atrium has a series of doors leading to its 98 offices and workshops, but many are locked and the blinds on windows pulled down.

It highlights how some workers will never return to Brickfields, the building in Hoxton owned by Workspace, a FTSE 250 property company. About 10 companies that were tenants have either left or are due to leave, while another eight have cut the amount of space they are using in the building.

However Brickfields is far from a ghost town: many companies in the building have so far survived the crisis because of emergency government support, and a few are thriving amid the pandemic.

Businesses have made good use of chancellor Rishi Sunak’s menu of assistance, led by the job retention scheme under which the state subsidises workers’ wages.

But the furlough programme expires at the end of October, and Mr Sunak’s successor plan, the job retention scheme is less generous, although on Friday he expanded it to cover two-thirds of the wages of workers at companies that have to close because of new government restrictions to curb the resurgence of coronavirus.

Brickfields in Hackney © Daniel Jones/FT
The interior of Brickfields © Daniel Jones/FT

This latest help from Mr Sunak is expected to focus on the hospitality industry: company executives in other sectors are therefore deciding which employees are, in the words of the chancellor, “viable” enough to return to the workplace.

The highly uncertain future is front of mind for Cecilia Di Vita, founder of Heart Aflutter Bridal, which makes wedding dresses and only moved to Brickfields last Christmas.

By the end of March “we had to close [operations] down”, she said, reflecting how weddings were banned at the start of the nationwide lockdown.

Ms Di Vita put all her workers on furlough, secured two local authority grants worth £35,000 and took out a £50,000 bounce back loan, the maximum allowed under the government-sponsored scheme that provides debt to small businesses.

Her business has difficult prospects because of the government’s restrictions on large events: no more than 15 people are at present allowed to attend weddings in England.

Ms Di Vita expects revenues this year to be about 80 per cent lower than 2019, because very few small weddings have gone ahead.

“August was hard, September was hard . . . It’s a whole season completely wiped out,” she said. Her concern now is next year — consumer confidence is gone, she said, adding that the government should provide tailored support for her sector.

The government’s restrictions on events have also caused problems for another Brickfields tenant: We Are The Fair, which each year organises more than 100 UK festivals. All have been postponed or cancelled in 2020.

Nick Morgan, chief executive, said revenues would be almost 90 per cent lower this year, and many of his 18 staff have been on furlough.

“It’s been horrific for most businesses — our sector has been banned from doing much of what they do,” he added, saying how important decisions are due this week on the distribution of emergency government funding for the industry by Arts Council England, the development agency. “We are very close to the cliff edge as an industry.”

Some income has come from another part of Mr Morgan’s business that offers advice to companies on compliance with health and safety rules. He has been busy helping businesses with risk assessments for coronavirus-safe workplaces.

Mr Morgan is frustrated at the absence of a government road map on lifting the heavy restrictions on the live events industry, because it has to book ahead. Deals are coming in, but with no certainty that events can happen, he said.

Nick Morgan, chief executive of We Are The Fair © Daniel Jones/FT
Emily Bendell, chief executive of Bluebella © Daniel Jones/FT

Graham Clemett, chief executive of Workspace, said that while few of his tenants have gone bust, due to the government’s emergency support for companies, “a lot have reduced headcount”.

“It’s not a great story for the UK economy,” he added. “It’s going to take a year, or sometimes several years, to rebuild some businesses. Others unfortunately will not recover.”

But Brickfields is far from empty: on a good day the building is between 40 per cent and 50 per cent full, higher than the 30 per cent average that Workspace has across the rest of its property portfolio.

This, in part, reflects a young and entrepreneurial mix of tenants in Brickfields: Mr Clemett pointed to successful companies in the building and the dynamism of the small business sector.

Emily Bendell, chief executive of online lingerie seller Bluebella, looked almost guilty when she said: “We had our best months ever during lockdown. Which was completely unexpected. We have had a good pandemic — God, it sounds weird to say that.”

Ms Bendell found that “having people at home on social media gave us more opportunity to speak to them and show them our product: Instagram is our shop window”.

But two things worry her: the end of the furlough scheme — and what that might mean for her customers — and a lack of government guidance on Brexit. “We are absolutely blind [on Brexit] and it’s an absolute disgrace we cannot plan . . . we have no idea what’s going on,” said Ms Bendell.

Another online seller in Brickfields has also enjoyed a good year: Philip Taylor, founder of Carbon Theory, said the lockdown meant soaring demand for his soap for problem skin.

Initially, the pandemic came with a shock: Boots, which sold Mr Taylor’s soap on the high street, temporarily stopped stocking the product.

But online sales quickly took over, and Mr Taylor predicted he will double revenues this year. “Our e-com literally quadrupled overnight,” he said. “This incredible audience out there on Instagram sitting at home and stockpiling stuff.”

Philip Taylor, founder of Carbon Theory © Daniel Jones/FT
Michael Olatunji, co-founder of Outset Studio © Daniel Jones/FT

Other companies in Brickfields have also done well: such as Unifrog, an online provider of jobs information for schools, and LiveSmart, which supplies blood test kits to companies that can track a range of health conditions, including whether people have the Covid-19 antibody.

Alex Heaton, founder of LiveSmart, said the group raised £2.2m in new funding during the pandemic at a time when many start-ups were struggling.

Some businesses in Brickfields are cautiously optimistic. Michael Olatunji, co-founder of Outset Studios, which offers studios by the hour for people to make podcasts, is more hopeful because of increased demand for his services.

But he said revenues would still be about 70 per cent lower this year. “Our mentality has just been to survive . . . get through each month, that’s what we kept saying.”

This is the latest article in a series looking at companies grappling with the consequences of the coronavirus pandemic

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