68% of SMEs negatively impacted by Covid cash flow crisis

Two thirds of small and medium businesses have had their cash flow negatively impacted by the pandemic, while 23% have been hit ‘very negatively’

The latest research by online lending platform CapitalBox found that cash flow issues had curbed investment with 25% claiming that they had been unable to pay employees and a further 15% had not been able to cover debt or loan repayments. This is despite the support from government with furlough payments covering 80% of salaries for staff unable to work during the pandemic.

Over the last year, government support has been critical with 55% of SMEs applying for and receiving help from the furlough scheme, 36% using tax relief and 43% applied for government loans.

In response, SMEs have had to take measures to cut costs including pausing or stopping future projects (36%), reducing staff hours (26%), reducing staff pay (25%), cutting office perks (25%), and reducing office space overheads (20%).

To survive, 56% of SMEs have had to take out a loan during the last year – mainly to pay for overheads (39%) and to pay wages (20%).

The worst affected sector was hospitality and leisure sector with 34% of SMEs in this space ‘very negatively’ impacted since the start of Covid-19. This is followed by those in utilities (32%), agriculture (22%), marketing and professional services (21%), and construction (20%).

Scott Donnelly, CEO of CapitalBox, said: ‘The majority of small and medium businesses feel that they have been sufficiently supported by the government during one of the hardest times we have had to face. We have seen an exponential rise in household saving during the pandemic due to closures of pubs, restaurants and shops which has in turn had a huge impact on small businesses that need our help to survive. They need the consistency of income and footfall.’

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