Business Spending Drops 41 Percent In April As Coronavirus Consequences Hit, Research Reveals
Data shows significant spending decline in entertainment, travel, and transport categories, while services and shopping spending increased. However, data shows signs of recovery in May
European businesses reduced their spending by 41 percent in April, compared to the previous month, according to the Soldo Spend Index. The resource, compiled by spend management platform Soldo, features data from a sample of 28,000 businesses across Europe.
The Office for National Statistics (ONS) announced mid-June that UK GDP fell by 20.4 percent in April 2020, and the effects of this significant drop are clearly reflected in business spending habits. According to the Soldo Spend Index, the average spend for businesses in the UK and Ireland decreased by 65 percent year on year in April. In the rest of Europe, it decreased by 57 percent.
However, there were signs of a slow recovery in May, as spending increased by 38 percent over the previous month. This corresponds to the government’s easing of lockdown restrictions, which were loosened on the 11th of May. Average business spending in the UK increased by 20 percent during the week commencing the 11th of May, compared to the previous week. This data suggests that the increased freedom of movement is providing a much-needed boost for some businesses while others continue to adjust to working remotely.
Areas of increased spending
From March to May 2020, business spending on services – including professional services, subscriptions, and software – increased by 81 percent on the previous year. Services accounted for 35 percent of all purchases made using Soldo during the month of April 2020. Business spending on shopping, such as purchasing stationery, tools, and relevant equipment, also increased, accounting for 30 percent of all Soldo transactions in May 2020. Online spend accounted for 58 percent of the expenditure over the period and people had to resort to borrowing money form lenders and brokers like CashFlex, for example.
Carlo Gualandri, Founder and CEO at Soldo says: “Businesses all over Europe have been hit hard by the coronavirus, and as these resilient businesses fight to stay solvent, cashflow and cost-control will be top priorities. For employees working from home, we’re heartened to see increased spending on software and business equipment, as this suggests that businesses are spending to ensure workers have the tools they need to work productively.
“The increase in business spending in May is positive, but we won’t be going to go back to what we once called ‘normal’ any time soon. It’s all about balance – you need to watch costs very closely while still spending in order to survive – and for this, real-time data is essential for full visibility into the financial health of your business.”
Most impacted sectors
The Global Business Travel Association anticipates $820 billion loss in revenues for the business travel industry, which is also reflected in Soldo’s Spend Index. Business transport spend, which includes money spent on taxis, motor freight carriers, local delivery services decreased by 74 percent in April 2020 compared to 2019 and accounted for just 17 percent of transactions made through Soldo. This increased to 21 percent in May, indicating a slow increase, although it is still 59 percent lower than the same period in 2019.
Business travel spend, which includes travel arrangement services, such as hotel or flight bookings, decreased by 92 percent in April 2020, compared to 2019. Average spending on travel increased slightly in May, however it continued to account for just two percent of transactions made with Soldo, up from one percent in April.