It might take X (months, years..) for small businesses in the UK to recover from 2020 losses.
It might take 6 months for small businesses in the UK to start recovering from 2020 losses
At the beginning of 2020 there were 5.94 million small businesses (SMEs) in the United Kingdom, which employed 16.8 million people, according to figures from the Department for Business, Innovation & Skills. Since the start of the Covid-19 pandemic, these numbers have changed; by September last year, 234,000 SMEs had closed permanently, based on data from the study The impact of Covid-19 on UK small business.
While the businesses that have gone out of market represent 4% percent, the rest of the SMEs are no better off and the best chance for survival is to access working capital loans. According to statements by The Federation of Small Businesses (FSB’s), at least 250,000 small businesses are at risk of closing due to restrictive measures to avoid contagion.
Surveys conducted by this institution show alarming results: 80% of small businesses do not expect their income to improve in the next three months, 23% have laid off personnel in the last trimester and 14% consider that they will have to do so in the coming months.
In early January 2021, the Chancellor of the Exchequer, Rishi Sunak, announced the creation of a 4.6 billion pounds ($6.2 billion) emergency aid program for businesses to address the third lockdown in the United Kingdom. This is in addition to the £280 billion that has been used to support businesses and workers since the start of the pandemic, according to Bloomberg.
Hotel, recreational and retail companies will be granted support of up to £9,000, in addition to the £3,000 provided to all businesses that have closed due to mobility restrictions. For a large percentage of companies this amount is not enough and they resort to financial products such as working capital loans to consolidate the rest of their expenses.
In view of these new measures, the FSB’s chairman, Mike Cherry, considers that the budget is not enough for companies that are “already under the cosh and on the brink”. Meanwhile, Kate Nicholls, chief executive officer of the UK Hospitality group, stated in a press release that this aid is “only a sticking plaster for immediate ills”.
In the same text, she proposes to grant tax extensions to companies on the payment of business rates holiday and VAT (value added tax rates) in effect until the second quarter of 2021.
Covid-19 situation in the UK
The United Kingdom has exceeded 3.85 million infections and 108 thousand deaths, for which Prime Minister Boris Johnson apologized and assumed full responsibility. In the meantime, 10 million vaccines have been administered in Great Britain, at least in the first dose, and it is expected that by mid-February 15 million will have been administered.
When small businesses could recover
According to predictions by The Confederation of British Industry (CBI), 2021 will be the fifth consecutive year of weak business investment. The Covid-19 pandemic in conjunction with the Brexit situation will maintain this trend. If the vaccination process continues to progress and confinement decreases, consumption will be paramount to the revival expected in mid-2021. As this happens, applying for financing as a working capital loan will be the best option to maintain cash flow.
Given this scenario in the United Kingdom, there is nothing left to do but to respect the restrictive measures and use digital tools that allow companies to work remotely or even implement new business models according to current needs. If the support granted by the government is not enough to keep your company standing, you can rely on financial products such as working capital loan to achieve this goal.
The number of businesses permanently affected by the Covid-19 pandemic is significant and will continue to grow. Some recommendations from experts are: generate agreements with suppliers to improve your payment terms, implement innovation in your processes and resort to working capital loan to achieve your digital transformation. Could you tell us how the coronavirus has affected your business?