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SMEs in UK take heavy Covid cashflow hit

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Covid-19 pandemic has had devasting effects across all industries, with SMEs in particular struggling to stay afloat.

New research from CapitalBox - an online pan-European SME funding platform - has found that 68 per cent of UK SMEs have had their cashflow negatively impacted during the pandemic, with one in four businesses unable to pay their employees due to these frustrations.

Loans and financial support have proved critical to pay staff and overheads in order to keep businesses going, with 42 per cent of SMEs agreeing that while government has provided ‘sufficient’ support, more could have been done as not all SMEs received help, such as furlough and tax reliefs.

Conducted by Opinium, the survey took place in November 2020 with responses from a total of 1,750 SMEs across seven European countries. The sample was 250 SME leaders in UK, France, Germany, Netherlands, Spain, Finland and Sweden.

Overall, 68 per cent of small and medium businesses in the UK reported having had their cashflow negatively impacted by the pandemic, with 23 per cent of those that responded saying they had been hit ‘very negatively’, with the other 43 per cent identifying with ‘slightly’.

Those SMEs that have had their cashflow impacted said that they were unable to reinvest in the business to help survive the recession (34 per cent); unable to pay employees (25 per cent); have had to turn down work and client jobs (25 per cent), and haven’t been able to cover debt or loan repayments (15 per cent).

In response, SMEs in the UK have had to take measures in order to cut costs and help them in times of crisis. These cuts have included pausing or stopping future projects (36 per cent); reducing staff hours (26 per cent); reducing staff pay (25 per cent); cutting office perks (25 per cent), and reducing office space overheads (20 per cent). To survive, 56 per cent of small and medium businesses in the UK have had to take out a loan during the last year, mainly to pay for overheads (39 per cent) and to pay wages (20 per cent).

Over the last year, government support has been crucial for survival. With 55 per cent of SMEs applying for and receiving help from the furlough scheme, 36 per cent received tax relief and 43 per cent leant on government loans.

The survey also confirmed that the industry which has suffered the most across Europe is the hospitality and leisure sector, with 34 per cent of SMEs in this space ‘very negatively’ impacted since the start of the Covid-19 pandemic. This is followed by those in utilities (32 per cent); agriculture (22 per cent); marketing and professional services (21 per cent), and construction (20 per cent).

Since the survey, the UK government has implemented new loan options to revamp the existing Coronavirus Business Interruption Loan Scheme and extended furlough, to ensure businesses are supported until we are out of the pandemic.

Scott Donnelly, CEO of CapitalBox, commented: “I am pleased to see that the majority of small and medium businesses across Europe feel that they have been sufficiently supported by their governments 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.”

“However, what I love about small businesses is that they truly thrive in times of disruption and crisis. They have the ability to be flexible, the power to adjust their way of working to meet the needs of consumers. Governments must make sure that they have access to immediate cash to avoid a gap that could damage their business, whether that is through loan schemes or working with alternative lenders outside of the retail space.”

The Bank of England is expected to provide an update on the Covid Corporate Financing Facility usage, to help businesses bridge the ongoing disruption to their cashflow caused by the pandemic through the purchase of short-term funds.

In March, a separate survey from Make UK suggested that Britain’s manufacturers are picking up the pace faster than expected after taking a massive hit during the coronavirus lockdowns in 2020. The survey said that growth prospects are positive for the rest of 2021, as the manufacturing sector recovers from the 10 per cent fall in output recorded in 2020.

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