, Britain
A pub in Leeds took about £2,900 over the bar on Friday 20 March 2020. That evening the Prime Minister asked pubs, restaurants and gyms to close. The following Monday the landlord did the cellar, wrote a sign for the window, and went home with roughly six weeks of cash in the account, eleven staff on the payroll and a brewery loan to service.
He did not take another pound over that bar until July.
The closure came with a day's notice and no revenue at all
This is what made 2020 unlike 1974, 1992 or 2008. In every previous episode, demand fell, or money got expensive, or credit dried up. In 2020 a business that was full on Friday was legally shut on Monday, and the revenue did not decline, it stopped.
Full lockdown was announced on 23 March 2020. Non-essential retail, hospitality and most personal services closed. A firm with fixed costs and no takings has a purely arithmetical problem: rent, rates, insurance, standing charges, finance payments and wages continue, and the only variable is how long the bank balance lasts.
The interventions came in an odd order and this is worth remembering, because at the time the sequence was the whole story.
The Coronavirus Job Retention Scheme was announced on 20 March, three days before closure, and paid 80% of wages up to £2,500 a month for furloughed staff. It was not open for claims until late April, so employers ran at least one payroll on trust. Grants for the smallest businesses were announced but paid by local councils at wildly different speeds. Self-employed support was announced later and the first grants arrived at the end of May.
Between March and May, a great many businesses were operating on nothing but the belief that the money was coming.
Furlough worked, and it worked through the employer
Furlough is usually described as a scheme that paid people. Practically, it was a scheme that reimbursed employers, and every part of it landed on whoever did the payroll in a firm of eleven.
You had to select who to furlough, write to them and keep the agreement. You had to keep paying them and then reclaim. When flexible furlough arrived in July 2020, allowing part-time working, you had to calculate usual hours and actual hours per employee per claim period. When employer contributions began in August 2020, the scheme stopped being free to the business. It was extended repeatedly and finally closed on 30 September 2021.
The landlord's real decision was not whether to furlough. It was who to keep. Furlough preserved the payroll, which meant a pub could hold on to staff it could not otherwise have held on to, and that turned out to matter enormously in 2021 when hospitality tried to reopen and discovered its workforce had gone elsewhere.
The grants were paid on rateable value, which is nobody's measure of need
Cash grants in the first lockdown were tied to the business rates system, because that was the only list of small premises that already existed and could be paid out against in weeks.
- A business in receipt of small business rate relief got £10,000.
- A retail, hospitality or leisure business got £10,000 where the rateable value was under £15,000, and £25,000 where it was between £15,000 and £51,000.
Rateable value is a valuation of premises. It is not turnover, not headcount and not fixed costs. So a busy cafe in a small unit and a quiet one in the same parade got the same money, a large business in a cheap building got nothing above the cap, and anybody trading without premises, which includes a great many self-employed people, got nothing from this route at all.
Alongside that came a business rates holiday for retail, hospitality and leisure for 2020/21, a VAT deferral for the March to June quarter, a moratorium on forfeiting commercial leases for non-payment of rent, and from 15 July 2020 a reduced 5% VAT rate on hospitality and tourism, which ran in that form for over a year before stepping back up.
Bounce Back Loans opened on 4 May 2020: up to £50,000 or 25% of turnover, fully guaranteed by the government, fixed at 2.5%, with no interest and no repayments for the first twelve months, over a six year term. Applications took minutes. That design was deliberate, because speed was the point, and the consequences of it took three years to arrive.
Some trades had the best year they had ever had
It is a distortion to write 2020 as a uniform disaster. Plenty of firms had a record year.
Anything to do with the home boomed: building work, garden landscaping, decorating, home offices, appliances, DIY. Bicycles sold out nationally. Delivery, logistics, packaging and anything supplying them ran flat out. Grocery, off-licences, pet supplies, IT support and anybody who could install a video conferencing system had more work than they could take.
The dividing line was not sector exactly. It was whether the thing you sold could be delivered to a house.
The debt was still there in 2023
By 2023 the picture had inverted. The pub was open, trading reasonably, and paying back a bounce back loan that had been quietly free for a year and was now a monthly figure. Energy costs had risen sharply through 2022. The deferred VAT had to be paid. Interest rates were rising for the first time in fourteen years. And the pandemic support that had kept the business alive was now a fixed outgoing on a business with thinner margins than it had in 2019.
A large number of firms that survived 2020 did not survive what 2020 cost them.
Where this shows up in the game
A Business Baron career that starts before 2020 trades straight through it, so it is a period you live through rather than a scenario you select. Closure is instructed rather than caused by demand, the support arrives on the real dates in the real order, and the grant you get depends on the rateable value of the premises you chose years earlier. The bounce back loan is genuinely free money for twelve months and a fixed monthly obligation for the six years after that, which is exactly the shape of decision the whole game is built around.