Covid 2021: Over 250,000 UK small businesses set to close
Jan 11, 2021
Over 250,000 small businesses across the UK are set to fold in 2021 according to findings by the Federation of Small Businesses (FSB). Its latest index shows confidence at its second lowest ebb in the ten year history of its report. The figures echo research by McKinsey and Company, which said in September the fashion industry’s economic profit would plummet 93 percent in 2020.
One in five firms reduced headcounts in three months to December; one in seven expect to do so this quarter. Furthermore, a record number of small business owners are planning to close their firms over the coming twelve months, putting the UK on course to lose more than a quarter of a million businesses, according to the latest Small Business Index (SBI).
Just under 5 percent of the 1,400 firms surveyed for the study say they expect to close this year. The figure does not reflect the threat of closure faced by those hoping to survive despite having frozen their operations, reduced headcounts or taken on significant debt.
The 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. There are 5.9 million small firms across the UK, according to the Department for Business, Energy and Industrial Strategy (BEIS).
The UK SBI confidence measure stands 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 vast majority of those surveyed (80 percent) do not expect their performance to improve over the next three months.
Close to a quarter (23 percent) of small firms have decreased the number of people they employ over the last quarter, up from 13 percent at the beginning of last year. One in seven (14 percent) say they’ll be forced to cut numbers over the next three months.
BEIS estimates that 16.8 million people work in smaller firms across the UK.
The proportion of small businesses forecasting a reduction in profitability for the coming quarter has spiralled over the past year, rising from 38 to 58 percent. The figure is at an all-time high. Almost half (49 percent) of exporters expect international sales to drop this quarter, up from 33 percentat 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. 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.
“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.”
“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’ve published a five-point plan to address gaps in the support landscape, and we look forward to the Treasury embracing it. Action in March will be too late to stem closures.”
“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.”
“All the while our exporters are trying to get across what a new EU-UK trade agreement means for them without the cash they need to make adjustments. Direct funding to help them manage new obligations in the form of transition vouchers is urgently needed. This Government can stem losses and protect the businesses of the future, but only if it acts now.”
Pre-Covid figures show fashion is the UK’s largest creative industry, worth 26 billion pounds and 800,000 jobs to the economy.
Image via Pexels