The Global business pulse focuses on two main elements of business leaders’ sentiment: the ‘outlook’ and the ‘restrictions’ their companies face. The impact of COVID-19 on the regional mid-market shows both tracking downwards at similar rates. The outlook was helped by the enduring levels of economic optimism, but business conditions did deteriorate significantly with revenue and profitability expectations at record lows, falling by 24 percentage points (ppt) and 20ppt respectively.

The restrictions side scored minus 57.3 for this wave, a little higher than the other regions surveyed. There were also sharp rises in concerns about demand constraints and economic uncertainty. As Rodger explains, the uncertainty relates to questions about the longevity of the government support measures introduced during the crisis: “Businesses are wondering: ‘What happens in the medium to long-term when these subsidies drop off?’” To plan for recovery, he says, firms will have to ensure they are in a strong position financially.

“Cash is still king at this moment in time. In some sectors, particularly services, there have actually been significant cost savings during the pandemic due to savings in travel and other costs. But across the board, businesses are focusing on cost control and working capital management to help them ride out the uncertainty of the next 12 months.

“Mid-market businesses in APAC are very good at doing more with less,” he continues. “And they are carrying out real, practical scenario planning, tracking performance and keeping a close eye on revenue streams.”

Export intentions have taken a hit across the region in the midst of COVID-19, and currently just over a quarter of firms expect these to increase over the next 12 months. But the landscape is again starkly different between emerging and developed APAC. While only 12% of businesses in developed economies expecting exports to increase over the next year, compared with 33% for emerging APAC – one of the highest levels recorded this wave. Emerging APAC businesses are still looking to international markets for growth post Coronavirus.

And while investment intentions followed business conditions downwards, investment expectations for R&D and technology, in particular, have held for firms throughout APAC and remain in line with global trends. As Rodger explains, “Mid-market businesses have embraced change faster than we’ve ever seen before, and the market is more forgiving. Leaders have changed their outlook and are exercising one of the mid-market’s key attributes: it’s ability to quickly respond to changes in markets. Innovation won’t just be happening on the surface anymore. COVID-19 has woken many businesses up to the power innovation can have, especially amid the disruption caused by the pandemic.”

Around two-thirds of businesses in the region (65%) cite economic uncertainty as a major constraint to doing business, an increase of 15 ppt on H2 2019. There has also been a sharp rise in concerns about demand constraints in the region, with 61% of businesses expecting a shortage of orders in the next 12 months, up from 46% in H2 2019.

Ailing demand has seen some large manufacturers shutter factories in recent months. But as Robert explains, the impact has been felt very differently across sectors: “If you’re a business in the services sector, particularly healthcare, demand has shifted and sales are strong. And the move towards digital communication has really opened the world up to services. New markets are available via Zoom.”

The shifting landscape has also had an impact on supply chains. “When COVID-19 hit, it caused a supply shock. There was an immediate trend where countries sought to look after themselves, and switched to manufacturing locally,” Rodger explains. “This is the case in Japan, for example, where there are lots of government subsidies available”. What is not yet clear is if, once subsidies are withdrawn, sourcing locally remains.