Today, European governments are balancing the need to keep their economies running while warding off the ever-present threat of COVID-19. Recent outbreaks of the virus in countries such as Belgium, France, Germany, and Spain are prompting questions about whether the much-feared second wave of the disease has already arrived. With European businesses already facing challenging trading conditions, and unemployment rising, many are fearful about what the autumn will bring.
So what are the key differences between markets in terms of the challenges that businesses face and how they are coping with the threat posed by the COVID-19 pandemic? Members of the Association of International Certified Professional Accountants’ Regional Advisory Panel for Europe exchanged perspectives in a recent videoconference.
France has experienced a recent surge in COVID-19 infections, which has led to the government making it mandatory for people to wear face masks outside in busy parts of Paris. Mask wearing will also be compulsory in certain outdoor areas of other cities. In the event of a second wave, the government plans to impose local lockdowns in affected areas rather than one that affects the entire nation.
The increase in infections is worrying for French businesses that are still trying to recover from the first wave of COVID-19. Hotels and restaurants, in particular, are struggling due to social-distancing rules and people’s reluctance to travel. Their finance teams are revising budgets, working out how to reduce costs, and undertaking cash forecasts till the end of the year, based on at least three scenarios — worst, probable, and best. Shops are also finding the trading environment difficult.
The finance leader for a manufacturing company said that supply chains were the biggest problem for his business. It cannot access certain parts due to suppliers becoming insolvent, so it is trying to find alternative suppliers and asking its existing suppliers that are still solvent to make components they wouldn’t normally produce. Investment is on hold, including investment in the digital transformation of finance, while short-term staff contracts are not being renewed.
Many employees who were previously based in an office are still working from home part time to fulfil their childcare responsibilities and enable social distancing in their workplaces. As a result, companies are looking to reduce their expenditure on buildings, whether those are rented or leased premises.
Germany coped well with the first wave of COVID-19. Nevertheless, it has tightened its border controls in response to a spike of infections. The coronavirus has disrupted supply chains, while the summer holiday period is also causing activity to slow down. A finance leader who works in consultancy said there is increased demand for consultancy work and a rise in job advertisements for finance professionals. Students are now returning to schools following the summer holidays.
Germany’s small and medium-sized enterprises have proved to be resilient during the COVID-19 crisis, partly because of their flat hierarchies and cash-based culture. They haven’t necessarily innovated to overcome the challenges they’ve faced over the past few months, but they have been very effective at improvisation.
There has been a rise in COVID-19 cases in Poland, including an outbreak amongst miners in the Silesia mining region. As a result, life is still far from normal in the country, and the government has issued strict rules on how to behave in offices. Large companies are prolonging home working for employees where possible and investigating whether they can permanently save on the cost of premises. Although resorts by the sea and in the mountains are full now due to the high season, the Polish tourism industry has been hit by the fall in foreign tourists visiting the country.
The finance leader for a food company said his business was working towards getting employees back in the office by 1 October, but the plan could be adjusted if there is a second wave of infections. He also noted that the pandemic had led to changes in consumers’ buying patterns, with positive implications for his business — people are buying more spreadable fats because they are baking and making breakfast at home. Also, more people are turning to vegan or vegetarian food. His finance team is currently focused on securing the company’s supply chain, monitoring payments, and ensuring that it has optimum levels of cash liquidity.
There is also innovation in the food industry as a result of the pandemic, especially in how products are reaching consumers. Also, the business is making greater use of digital tools to interact with customers and business partners. The finance leader has highlighted that technology is an enabler for longer-term sustainability and survival.
Russia appears to have weathered the worst of its initial COVID-19 outbreak and is now trying to restart its economy. The government is providing some state aid to vulnerable businesses, but this may not be enough. Some bigger companies are on the brink of bankruptcy, while the owners of smaller businesses are largely relying on their own entrepreneurial skills to survive. People are afraid to go shopping in public, which means that stores are offering substantial discounts to attract customers. Finance teams are helping their organisations withstand a general drop in consumer confidence. Some businesses did, however, manage to benefit from the crisis, for example, home delivery firms and online learning providers.
Similarities and differences
The COVID-19 pandemic presents common challenges to businesses across Europe, including the health and safety of employees and supply chain disruption. However, economic conditions and government restrictions vary by market, presenting unique challenges to businesses, depending on where they operate.
Yet all European businesses face the prospect of an uncertain — and potentially very difficult — autumn and winter trading period. For many, their survival will depend on whether government policies can contain the virus and prevent a second wave of the pandemic — and whether business and public confidence can be built, and maintained, into 2021 and beyond.
— Andrew Harding, FCMA, CGMA, is chief executive–Management Accounting, and Jakub Bejnarowicz is regional director–Europe, both at the Association of International Certified Professional Accountants. To comment on this article or to suggest an idea for another article, contact Oliver Rowe, an FM magazine senior editor, at Oliver.Rowe@aicpa-cima.com.