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Douglas Squirrel

Pent-Up Demand

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Douglas Squirrel

It seems to me that there is going to be a flood of demand once this is all over:

  • I have a client providing an online travel service who have furloughed almost all their staff. I recommended those remaining active should, among other things, run some load tests to verify that their website can handle a tremendous rush, when everyone is let out and immediately books a holiday.
  • My commercial motor insurance client is laying off 40% of staff next week, but at the same time the sales director is making plans to hire an army of salespeople at the unknown future moment when their customers all get back on the road in the space of a few days and instantly need insurance.

Are others predicting the same trend or do you see it differently?

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Matthew Colley

I am aware that Rishi Sunak (UK chancellor) has put the scheme in place for furloughed employees. 

But I am yet to meet anyone that has exact details on how the process will work. I recently spoke to a small consulting firm

with 11 employees recently furloughed. None of them know when their next pay check will arrive, if at all. Can solo practitioners with

 LTD companies who take a salary furlough themselves? Self employed people who make more than £50k are not eligible for any help for the government.

I can see massive demand returning, without the people in place to meet it. 

 

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Douglas Squirrel

I've assumed that there's no government help for me as a 2-person company with high six-figure profits, so haven't checked in any detail. I think I could furlough myself and my wife at 80% of our nominal salaries, which would be absurd (we pay ourselves mainly in dividends, which makes most sense here in the UK unlike the US).

My client did manage to navigate the system and get 80% pay for all their furloughed employees; it doesn't seem to have been too difficult for them.

As @Alan Weiss said on the blog recently, the question is whether we have a V shape (everyone comes back at once) or a U shape (there's a pause at the bottom before the rush). I can't find any early indicators that would distinguish those two, but I can't see any third option either, so am preparing for the rush one way or the other.

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Alan Weiss

I posted the US subsidies for both small firm owners and private contractors elsewhere here, FYI. Could there be a similar program in the UK?

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Matthew Colley

Thanks Alan

In the UK the situation seems to be:

Employees get 80% of salary capped at £2,500 pcm for three months

Self employed (not within a Ltd co): 80% of the last 3 years profit averaged, capped at £2,500pcm for three months. HMRC will call you, don't call them apparently.

This is only for people that make less than £50k profit per year. If you made more than that, you get nothing.

Ltd Co dividends are not allowed. So if you only took dividends you get nothing.

I am lucky to have cash reserves. 

Douglas in the construction industry many employees are being furloughed and companies have paused. Yet the rate of planning applications entering the systems has only dropped off slightly. In some boroughs it has increased.  I agree, when things get back to normal the demand will be very high. For the built environment sector I think the demand could be 'V shaped'. There is pressure to move these projects along quickly.

A friend in the MET police is very worried about the 'end of April/start of May'. That is when many working in the gig economy will run out of money.......

Panic on the streets of London? I doubt it, things seem calm so far.

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Alan Weiss

You're not lucky, you were smart.

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andrewhollo
4 hours ago, Matthew Colley said:

Panic on the streets of London? 

I wonder to myself, could life ever be sane again?

Nice job embedding that one Matthew,

Andrew

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