More than a quarter of a million UK small businesses are set to collapse over the next 12 months, according to the Federation of Small Businesses (FSB).
The FSB’s quarterly Small Business Index (SBI) shows business confidence at the second lowest ebb in the report’s ten-year history, the lowest point was recorded in March 2020.
The UK SBI confidence measure stands at -49.3, down 27 points year-on-year. The majority of those surveyed (80%) do not expect their performance to improve in the next quarter.
Of the 1,400 respondents, 23% have cut their headcount over the last three months. This is up from 13% at the beginning of 2020. One in seven (14%) say they’ll be forced to cut numbers in the next quarter.
According to the Department for Business, Energy and Industrial Strategy (BEIS) around 16.8 million people work in UK small firms.
The study shows that 5% of small firms say they expect to close this year. But, the figure does not reflect the threat of closure faced by companies hoping to survive despite having frozen their operations, staff cuts or taken on significant debt.
The number of small companies forecasting a reduction in profitability for the next three months has spiralled over the past year, rising from 38% to 58%. The figure is at an all-time high.
49% of exporters expect international sales to drop this quarter, up from 33% at this time last year.
FSB National Chairman Mike Cherry 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, at huge cost to local communities and individual livelihoods.”
Cherry said that a record number of small firms who are planning to close this year, were already planning to do so before the prime minister announced a third lockdown.
“At the outset of the first national lockdown, the UK government was bold. The support mechanisms put in place weren’t perfect, but they were an exceptionally good starting point. That’s why it’s so disappointing that it’s met this second lockdown with a whimper,” He added.
The chairman pointed out that “company directors, the newly self-employed, those in supply chains, and those without commercial premises are still being left out in the cold.”
He said that the group which represents small firms in Britain has published a five-point plan to address “gaps in the support landscape”. “
Cherry called on the government to “act now” to stem losses and protect the businesses of the future. ”Action in March will be too late to stem closures.”
He continued: “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.
Speaking on Brexit, he said that exporters “urgently” need direct funding in the form of a “transition voucher” to help them manage new UK-EU obligations.
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