This week has showed that even the biggest household names are struggling during this crisis, with large retail layoffs from names like Harrods and John Lewis. But others are suffering too. Aerospace has been hit hard with likely lower demand for commercial airlines for some time, and engineering firms are also wondering what the future holds.
One household name you might be surprised by, is McLaren. The supercar maker and formula 1 team appears to be struggling:
“Like many other British businesses McLaren has been severely affected by the current pandemic and is therefore exploring a variety of different funding options to help navigate these short-term business interruptions.” A spokesperson told Sky News.
Forbes reported that the financial troubles faced by the firm could lead to insolvency by the 17th of July if a solution was not found.
With Formula One suspended, pending a re-start this weekend, a key stream of revenue has been placed on hold. In the first quarter of 2020, the group posted a £133m loss across its racing and road car business. When the Australian Grand Prix was cancelled and the season was temporarily suspended, McLaren faced tough cost cutting decisions. Drivers took pay cuts, and across the F1 and supercar business, around 1,200 redundancies had to be made to keep the cars (and company) on track.
With demand for supercars depressed, and little in the way of sport income – it’s crunch time for payments to its suppliers.
Last Monday, the group secured a £150m loan from the Bank of Bahrain to keep itself afloat. This followed reports that the group was considering offering its HQ at Woking and its incredibly rare car collection as collateral.
As the teams line up on the grid at the Austrian Grand Prix this weekend, McLaren are likely hoping the focus can now return to the action on the track, with their immediate future secured off of it. Having achieved their best finish since 2012 last season (4th in the constructors’ championship), they are looking to return to the top. Although they certainly won’t be the last team affected by the current situation, or the impending budget restrictions from the 2021 season onwards.
This example really demonstrates that even the biggest names are being heavily affected by the current situation. It’s not the case that you can take a risk on a business simply because it’s a household name – you’ve got to make sure you’ve done your due diligence.
To support organisations to make the right decisions and provide additional insight into how the COVID-19 pandemic is affecting businesses, Graydon have produced the COVID-19 impact score, which, based on several key factors, including sector, size, cash flow, and location, evaluates how badly affected any given UK business has been. It is available as part of a wider financial health check of your customer or supplier portfolio.
I can help with this – please get in touch if I can help with regards to a customer or supplier check, you can email me: Charlie.firstname.lastname@example.org