So what effect is Covid-19 having on our sector?
Property Investors are telling us that they will still invest if deals can be agreed and valuers can underwrite the figures. And they want to work towards reaching further agreements. Some occupiers are still keen to progress leases and we have a good number of transactions in solicitors’ hands. That said, we are seeing that other businesses, particularly SMEs, are finding it hard to be confident of how they will be able to manage their finances into the future.
So here’s a more detailed review of what we think about Covid-19 impact on the research/R&D sector.
Charities, including universities, have less money coming in, and that’s likely to get worse. So cost cutting is underway for many and there will be ongoing pain that needs to be managed. Into the future we will see more collaborations and joint approaches to problem solving. The EU is already battling over what to spend money on – let’s hope that the UK can find consistant funding for long term blue sky work as well as the shorter term, near to market based research. Our research excellence is a global USP we mustn’t give up lightly.
Quarter 1 income and spend is not indicative of what lies ahead for business – a lot of the quarter was unaffected in terms of operation and indeed stock piling of product by customers in some sectors meant higher than normal levels of income. Quarter 2 will be very different. Medtech companies likely to suffer badly on sales lost to inactivity, SMEs with Venture Capital backing quite likely to find it harder to keep their capital coming through against slipping programmes.
What we see:
• A lot of collaborations being formed, at pace, particularly in Covid-19 related work, including antiviral therapies, mechanical breathing devices, etc. Relationships formed during this period may well endure.
• Venture Capital is still there, with apetite for the right things – such as potentially promising diagnostic equipment design and manufacture relating to Covid-19 (including immunity analysis, anti-body analysis, etc.) and areas of work that can be built around the ‘new norm’
• When Covid-19 vaccines are found they may be RNA and DNA based and capable of synthetic manufacture – which is quicker but still requires sophisticated clean room space of which there is a shortage in the UK and some previously redundant space in more secondary locations may find markets that they can use to get space and equipment utilised again
• It is now easier in some Life Sciences sub-sectors to secure ‘emergency use authorisation’ that can speed up approvals and routes to market of product. We may find that some of these new practices endure beyond Covid-19
• Companies most likely to be hit hard in the next six months (almost all will have been hit in terms of market cap already, we are now referring to income streams and ability to progress R&D) are those in Life Sciences needing doctor and patient access in non-Covid-19 fields and those in auto and travel related sectors
• Clinical trials are proving difficult to maintain and this could cause longer term damage to result collation and product adoption. It is also likely to be difficult to start new trials outside Covid-19, for a long time
• Property refurbishment/development is proving difficult to progress against property valuations that are hard to validate and construction programmes hard to bring sufficient clarity to
• We have total uncertainty as to what lies ahead – never a good thing in relation to business investment
At least the UK government has now come out to launch a package to help tech start-ups this week. Germany and France seem to have better organised governments to tackle the virus itself and to protect their businesses. But a £1 billion support package is welcome and it will now sweep up businesses for whom remedies have been distinctly lacking until now.
Author: Jonathan Burroughs, CEO, Creative Places