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​FEATURES

Webinar report: Funding supply chains for recovery in a post-Covid world

14/7/2020

 
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Communicating with suppliers, buyers and finance providers is more essential than ever in a crisis. That was the unanimous conclusion of the speakers in the latest Working Capital Forum online meeting, Funding supply chains for recovery.
Selena Moon from American Express set the scene by warning that, ‘The government’s gradual withdrawal of support is likely to lead to a cash flow crisis among the UK’s SMEs that account for 50% of the total revenue generated by UK businesses and 44% of the country’s labour force.’

For Lee Bishop, Major Developments Director at UK construction firm Taylor Wimpey, the key issue was to ensure that the smaller contractors which are essential to every development were able to continue trading. 

When the Coronavirus crisis hit, Taylor Wimpey itself was relatively cash-rich, a legacy of changes made after the financial crisis of 2008, when the company found itself with £3bn in debt. Sharing some of that cash with smaller suppliers was a way both to do the right thing and to ensure continuity of services. 

The programme that resulted, called “Pay it Forward”, was put in place in less than seven days, including the time to ensure the scheme was compliant with the law on taxation and with banking covenants. 

Under the scheme, key contractors were paid early up to a maximum of £45,000 each, cash which they passed on to their workers who might otherwise have had no income during the lockdown. The key to the scheme’s success was the firm’s ability to move fast and communicate with internal stakeholders and with the subcontractors themselves, said Bishop.

On the other side of the buyer/supplier divide, and in a very different sector, was Tristan Dessain-Gelinet, CEO at B2B travel services provider Travel Planet. The company had won a significant slice of UK public sector travel business in 2019, only to see travel come to a shuddering halt as the virus hit. “We had to adapt and work out a way to finance our working capital in a very short time,’ he said. 

Travel Planet put in place a confidential factoring solution to run alongside its existing sources of cash. Crucial to its survival, though, was the support of a major customer which gave it access to its supply chain finance programme. Deassain-Gelinet quoted Darwin on the importance of being able to adapt rapidly to changing circumstances. These days, he joked, ‘you have to look after your cash as well as you would look after your mother.’

Philip King, the UK government’s small business commissioner, echoed the need for better communication between buyers and suppliers, especially in the SME sector. He had specific words of praise for Taylor Wimpey’s scheme as an example of how the best companies behave when things get tough – but warned that worst may be yet to come. ‘Eight or nine months from now we’re going to see some really testing times, ‘ he said. “Cash will be king, emperor and president, and small businesses will need to adapt.’

The full webinar can be viewed on demand here

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