Is business investment central to SMEs surviving a crisis like coronavirus?

“We saw more change in the three months from May to June 2020 than we have in the seven years since we set up the business.”

So says Paz Sarmah, owner of Bad Brownie. He’s one of many Barclaycard Business customers working out how to survive and thrive in the face of unprecedented economic, social and financial challenges.

When UK lockdown measures kicked in, on 23^rd March 2020, Bad Brownie lost 75% of its revenue overnight. Face-to-face (markets, festivals and their Canary Wharf stand), wholesale (to cafes) and corporate orders (delivery to offices) completely disappeared, leaving them with online as their only remaining revenue stream.

Fast forward to Q3 2020 and Barclaycard Business payments data for the first half of the quarter showed the average daily value of small business transactions was actually up 60% compared to the daily average for Q2². And our third SME Barometer^[1] – released 20^th August 2020, showed that SMEs exceeded their revenue predictions for Q2. SMEs did report an average 14% decline in revenue (Q2 vs Q1 2020). However, it was 50% less severe than the 28% drop they predicted in the previous SME Barometer.

Fortunately, Bad Brownie was already well set up for selling online, and had a strong online presence and a highly engaged social following, thanks to their small business social media strategy. And it paid off. Their online sales took them by surprise. So much so, that every week, they continue to make enough brownies that if you stacked them end-to-end, they’d be taller than The Shard, and probably back again.

At the height of coronavirus, Bad Brownie saw online sales at 20 times their usual volume. This has since dropped off to around six times the usual volume, but the numbers are still up. In August 2020, they began the process of doubling their kitchen premises to meet increased demand, fitting it out and buying equipment using their Barclaycard business credit card.

They’re not the only business investing – four in five SMEs are preparing for recovery by investing over the next 12 months. This is up from two thirds of SMEs in the previous quarter. 32% of businesses plan to invest in new equipment & technology and 28% in marketing¹.

Government schemes like Eat Out to Help Out have played a part in a sector that relies on consumer card payments. Many cafes, takeaways and restaurants couldn’t reopen until the start of Q3, meaning Q2 was very tough for many.

Barclaycard SME transaction data for the first half of Q3 showed consistent week-on-week growth, with the average daily transaction value rising by 60%, on average, for Q2[1]. However, card transactions for the first half of Q3 remain 13% behind the same point last year¹.

Barclaycard Business customer Black Milk has a cafe in Manchester, and owner Andy Young is grateful for government help to push the numbers back up.

“Eat Out to Help Out definitely boosted the numbers of people dining in, not just taking away. It’s a delight to see our cafe buzzing again. Thankfully we had a strong business going into lockdown, and with the support of our loyal guests, August 2020 was our best month of sales in five years of trading.”

Emma Jones, founder of Enterprise Nation, says, “We’ve seen SMEs begin to emerge from lockdown in a place of strength – a huge testament to their resilience and their willingness to seek and take advice. It’s heartening to know that the Government support measures and resources have helped our nation’s small businesses during the pandemic.”

^[1]Research was conducted online by YouGov on behalf of Barclaycard Payments between 21 July – 10 August 2020. YouGov polled 577 senior members of staff working in UK SMEs, weighted by region to reflect SME distribution in the UK. This data has been compared to Barometer data, conducted online by YouGov between 1 – 21 April 2020. YouGov polled 576 senior members of staff working in UK SMEs.

^[2]Calculated using SME transaction data from Barclaycard’s payments processing systems (e.g. Barclaycard card machines in stores), as of close of business Thursday 13^th August 2020.