More than 250,000 small businesses are at risk of collapse without further financial help from the government, according to a survey by the sector’s trade body that reveals the continuing damage on companies from almost a year under coronavirus restrictions.
Just under 5 per cent of 1,400 companies surveyed for the Federation of Small Businesses quarterly index said they would shut their doors for good this year, a record level in the report’s 10-year history and more than double the comparable figure a year ago.
Some 5.9m small companies operate across the UK, according to the government.
The survey was carried out at the end of December, before the latest lockdown started, adding further to the worries about the health of the small business economy.
Such companies are the largest employers in the UK as a whole, accounting for some 17m jobs. But the report showed that they were also taking further drastic measures to survive, which will result in widespread job losses. Close to a quarter of them cut jobs in the three months to December, while a further one in seven expect to reduce staff this quarter.
Business confidence had fallen to the second-lowest level in the survey’s 10-year history, the FSB said, with pessimism only exceeded last March in the depths of the first national lockdown. Four-fifths do not expect their operations to improve over the next three months.
FSB national chairman Mike Cherry said the UK risked “losing hundreds of thousands of great, ultimately viable small businesses this year, at huge cost to local communities and individual livelihoods”.
He described the government’s efforts to provide greater support during the latest lockdown, which included £4.6bn of new grants, as “disappointing”.
“At the outset of the first national lockdown, the UK government was bold . . . that’s why it’s so disappointing that it’s met this second lockdown with a whimper,” he said.
The chancellor has promised to revisit financial support for businesses in the March budget but Mr Cherry said this “will be too late to stem closures”.
He said: “Company directors, the newly self-employed, those in supply chains and those without commercial premises are still being left out in the cold.”
The number of companies expecting profits to fall over next three months has also hit all-time high, at 59 per cent, while exporters warned about the impact of the EU-UK trade deal. Almost half of exporters expect international sales to drop this quarter.
Pessimism over exports in the FSB report was matched by a similar poll of sector executives carried out by manufacturing industry body Make UK and advisory firm PwC, which highlighted fears over the impact of the UK leaving the EU single market.
A third of manufacturers warned that investment prospects would decrease with the UK outside the EU, according to Make UK, with major worries over customs delays and increased costs of regulation.
But companies were more optimistic about the outlook, with more businesses confident about sector prospects than the UK economy, and seeing opportunities outweighing risks.