IBM looks at pandemic and post-Brexit fallout, sees only lucrative opportunities

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IBM believes the pandemic and Brexit could play to its strengths in 2021 – saying it needed to turn threats into opportunity in the latest profit and loss accounts filed for its loss-making UK operation.

According to the financial document for the year ended December 31, 2020 [PDF] – filed at Companies House on August 18 – Big Blue said of its key risks and uncertainties:

“Specifically, over the coming year, the main business risks will still relate to the COVID-19 pandemic and the impact on the economic environment. The end of the Brexit transition period and the new working relationship with the European Union will also have a short-term, long-term impact.”

He added: “The pandemic continues to evolve rapidly with new variants threatening current treatments and the effectiveness of vaccines. The new Brexit deal and the pandemic both present an opportunity for the company, for example, data-driven healthcare initiatives, scalable digital business models, reinventing e-commerce, supply chain, data compliance and also enabling and accelerating digital collaboration.”

The UK’s gross domestic product – the value of everything produced by the UK economy – fell 9% year-on-year in 2020, the Office of National Statistics said, as multiple lockdowns designed to curb the spread of the virus have hampered economic activity.

The National Institute for Economic and Social Research said in May that the UK government’s handling of the pandemic and Brexit indicated the local economy could see £727bn of lost output over the next five years.

IBM estimates that Britain should “invest heavily in digital infrastructure” and push through reforms to “increase productivity if it is to repair the long-term economic damage left by the COVID-19 crisis and the effects of Brexit.

Changing work habits certainly forced companies to reassess their technology infrastructure last year, although IBM was not one of the main beneficiaries, as evidenced by its 2020 global results.

Turning to the UK component, IBM’s revenue fell 9.7% in the year ended December 31 to £3.515 billion. This, he said, “reflects the unprecedented macroeconomic environment that has resulted from the COVID-19 pandemic with the company’s customers focused on operational stability, flexibility and cash preservation.”

Intercompany sales are down, as are Cloud & Cognitive, Global Business Services, Global Technology Services and Systems.

In another big sleight of hand, IBM managed to turn its pre-tax profit of £57.7 million into a pre-tax loss of £114 million, which it attributed to an increase in administrative expenses and an impairment of investment expenses.

The average number of people employed during the year fell to 10,501 from 10,955 the previous year. Those ranks will be further thinned once IBM turns its GTS unit into a separately traded entity later this year. ®

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