Thermopatch, located just outside of Amsterdam, produces labels for personal protective equipment, as well as for other less specialised garments. This makes it a critical supplier. The core business continued as the virus raged; a blessing for a finance director who could foresee the devastation to the financials if this had not been the case.
Huyton joined Thermopatch 26 years ago in a typical case of practitioner turned CFO – in this case, to assist with a stock-market listing. The Dutch company was sold to a US group and is now present across Europe. While it has a US parent, it has autonomy at the European level. Production takes place in the Netherlands, the UK and Poland. There are sales and marketing offices in France and Germany. COVID has revealed some very different national approaches to what is ultimately a global crisis.
“The crisis has truly demonstrated this challenge,” says Huyton. “Every country is doing something different.” The UK’s 2m social distancing rule has set it apart from the rest of Europe, which has adopted 1.5m as the norm. Now any distance is fraught with concern about it inhibiting a return to business as usual. Obviously there is a tricky balance to be struck. Now the UK government is discussing the reduction of social distancing to 1m – potentially remaining at odds with the rest of the continent (though at the time of writing, it could still opt for 1.5m).
The UK production facility is a case in point. “Thermopatch has invested heavily over the last couple of years and the upshot is that we have reduced space. Under these conditions, we cannot put all the staff back into the facility. Perhaps 60% can return. Even reducing the social distancing measure to 1.5m would not get everyone back,” says Huyton.
He is voicing the concern of manufacturers everywhere – and the problem applies to retail, hospitality, travel, and so on. By comparison, the Netherlands’ production facility is large; and so is the brand new one in Poland. Space, for Thermopatch, is a uniquely UK problem.
Supply chains were perhaps the dominant worry for Huyton at the beginning of 2020, before the virus had spread from Wuhan. At that time, it seemed that supply chains would be impacted; not that there would be thousands of deaths and then corporate failures worldwide. “So far, supply chains have been cost-driven. But, as we have seen, there is a penalty to pay,” says Huyton. It is not easy to bring the world together when the virus has put borders under the microscope.
Huyton describes the lockdown in the Netherlands as “relaxed”. He adds: “The Dutch have a reputation for being practical.” Bars and restaurants have been open for some weeks with clientele occupying terraces rather than inside bars. Schools have been open for several weeks too. There is a general economic and social activity, so there is no great return to normal; more of a continuous flow.
The UK has also been subject to relentless bad news and there is a palpable nervousness as well as confusion over quarantine. Meanwhile, the Schengen area is now largely open.
“I would, in better times, travel every month,” says Huyton. “Not now. But lack of travel has not been a disaster. Technology has made everything perfectly do-able. However good video communications have been, I will return to travelling, but continue to use more technology too.”
Travel and tech aside, Huyton says the big step change will be around sustainability and accounting for climate change. “All of this has brought sustainability to a head,” he says. “And this is an opportunity to have proper discussions.”
He turns to the thorny issue of how a company should be measured. The traditional return on capital and the use of historical data is in danger of no longer being adequate. “We need some imaginative thinking,” he says. “ICAEW has an opportunity drive things forward. These are good challenges; it is time to evaluate whether traditional measures are fit for purpose.”
Of course, the crunch will come in three to four months when we either have a second wave of the virus or we arrive at a point where we can truly take stock. The impact on the Netherlands economy could potentially be less severe than other countries as a consequence of the strict labour laws. Salaries are more likely to be reduced than headcounts; this is true of much of Europe. In the UK, we shall have to wait and see which way employers jump.
