23 April 2020
The bodyshop industry in the UK is reaching crisis point and an urgent cash injection is needed to keep businesses alive.
That was the ominous headline message delivered by Chris Weeks, executive director, NBRA, who was speaking at the sixth weekly webinar hosted by ARC360, in association with I Love Claims, yesterday. He was joined on the panel by Ian Pugh, managing director, Fix Auto UK and Jordan Chinn, network manager, Innovation Group.
Chris said that the cashflow crisis has deepened for repairers in the last week as jobs that were in progress when the lockdown was introduced have now dried up. After writing an open letter to 36 of the UK’s largest insurers and work providers calling for tangible and immediate support, he warned that if it wasn’t forthcoming they could soon witness the dismantling of the repair networks they rely so heavily on.
Starting to hit
‘The low claims volumes are really starting to hit bodyshops now,’ Chris said. ‘Even some of the bigger groups are worried. This situation is going to go on for quite a while and bodyshops are operating at a real loss. They’re losing money quick.
‘If I was a work provider I’d be trying to establish whether it’s better to give bodyshops a lifeline now or deal with the aftermath of 25% of bodyshops closing or going bust. I know there has been some help, but it isn’t enough.
‘The people who help bodyshops out now will never be forgotten.’
Some reports suggest the UK motor insurance industry could profit by £10bn from this crisis as claims dry up. Following the lead of American insurers, on Monday (20 April) Admiral became the first in the UK to offer premium rebates to policy holders. As yet similar offers to repairers have not been forthcoming.
Grants
However, there are measures bodyshops can take immediately to ease the financial strain. Ian explained how Fix Auto UK is winning the argument with council authorities to categorise their sites as retail businesses thus entitling them to a £25,000 government grant instead of the £10,000 set aside for bodyshops.
He said, ‘We have managed to secure the retail grant from a number of different authorities. There was a lot of red tape, but the major focus for us is making sure our shops have the cash in the business to survive the next 90 days.
‘So far, we’ve secured £360,000 in grants. I have now set the team a target of £1m to support the network.
‘If other bodyshops want to talk to us about how to go about it, whether they are part of the Fix Auto network or not, then I’m more than happy to share our knowledge. This is about keeping the industry alive.’
He also urged businesses that have not done so to defer business rates, adding that this can be backdated to the start of the crisis.
Furlough
Meanwhile, bodyshops that have Furloughed staff have since Monday (20 April) been able to start claiming 80% of their wages back. Chris said NBRA members have found the government portal simple to navigate but offered support to any members who were struggling. He added that those unsure whether to Furlough their staff for another three-week block should do so.
He said, ‘I know they’re worried about missing out when the lockdown is lifted, but the feeling is the market won’t come to life again the near future. We’ve got more of the same for the next period.’
Contingency planning
Exactly how long ‘the next period’ will last is the million-dollar question, and it is this uncertainty that is making contingency planning so difficult. The lockdown in its current form is in place until at least 7 May, when the government will make further announcements. There have been reports of a phased relaxing of restrictions, but even if that is true no one can predict how the market will react.
Jordan said, ‘The aftermath of any extreme causes turbulence. Will we see a different industry after this, or will we keep doing what we have always done? Every business has been affected by this, so things will change, but there are just too many variables to know what will happen and whether new habits will hold.’
Ian advised bodyshops to plan for the worse-case scenario, suggesting it was the only way to avoid being caught out by a slow or fluctuating return to volumes.
He said, ‘When this started it was like someone flicked a switch, but I think it will follow a different pattern coming back. I’m planning for volumes to have not recovered fully by December.’
Consolidation
Looking longer term, one consequence of the pandemic will be greater consolidation. The average age of a bodyshop owner is 58 and there is a feeling many will be reluctant to step back into the driver’s seat after this.
‘This could be a catalyst for bringing forward people’s retirement,’ Ian said. ‘They could go from business owner to landowner.’
He added that one key lesson to be taken from this crisis is to build businesses with stronger balance sheets so they have greater resilience when operations fall below critical mass.
He said, ‘There is a saying that you’re three pay cheques away from the street.’
ARC360, in association with I Love Claims, is supported by corporate partners ACIS, BMS, EMACS, Entegral, Enterprise Rent-a-Car, Nationwide Vehicle Recovery Assistance, S&G Response and CAPS; partners The Green Parts Specialist, Indasa, and Innovation Group; and strategic partners AutoRaise, NBRA, RepairTalks and TrendTracker.