Covid puts 250,000 small businesses at risk of failure

Some 250,000 small businesses are at risk of closure as a result of the pandemic according to the Federation of Small Businesses (FSB), which is calling on the government to provide more support for the sector during the latest national lockdown

The FSB’s quarterly small business index (SBI), based on 1,400 responses at the end of December, found its confidence measure stood at -49.3, down 27 points year-on-year.

The reading is the second-lowest in SBI history, second only to that recorded in March 2020.

The majority of those surveyed (80%) said they do not expect their performance to improve over the next three months. 

Just under 5% said they expect to close this year. This proportion is at an all-time high for the SBI, which launched in the wake of the financial crash, and is more than double that recorded at the same point 12 months ago.

Based on government figures showing there are 5.9m small firms across the UK, the FSB says this suggests up to a quarter of a million could shut down.

Close to a quarter (23%) of small firms surveyed have decreased the number of people they employ over the last three months, up from 13% at the beginning of last year.

One in seven (14%) say they’ll be forced to cut numbers over the next three months.

The proportion of small businesses forecasting a reduction in profitability for the coming quarter has also hit an all-time high, rising from 38% to 58%.

Almost half (49%) of exporters expect international sales to drop this quarter, up from 33% at this time last year. 

Mike Cherry, FSB national chairman, said: ‘The development of business support measures has not kept pace with intensifying restrictions. As a result, we risk losing hundreds of thousands of great, ultimately viable small businesses this year.

‘A record number say they plan to close over the next 12 months, and they were saying that even before news of the latest lockdown came through. 

‘There are meaningful lifelines for retail, leisure and hospitality businesses, which are very welcome as far as they go. But this government needs to realise that the small business community is much bigger than these three sectors.

‘Company directors, the newly self-employed, those in supply chains, and those without commercial premises are still being left out in the cold.

‘We also have to look again at how we treat emergency debt facilities over the coming months. Many of those who have borrowed significantly have done so in order to innovate. It would be a shame to lose the top businesses of tomorrow because of a failure to extend grace periods today.   

‘This government can stem losses and protect the businesses of the future, but only if it acts now.’   

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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