Majority of UK SMEs negatively impacted by COVID cash flow crisis

LaToya Harding
·Contributor
·3-min read
A shop cash register is seen with both Sterling and Euro currency in the till at the border town of Pettigo, Ireland October 14, 2016. REUTERS/Clodagh Kilcoyne
According to new research from CapitalBox, one of Europe’s largest online-only lending platforms, 23% of those that responded to its survey said they have been hit ‘very negatively’, whilst the other 43% ‘slightly’. Photo: Reuters/Clodagh Kilcoyne

Some 68% of small and medium enterprises (SMEs) in the UK have had their cash flow negatively impacted during the coronavirus pandemic, while one in four businesses were unable to pay their employees, it has emerged.

According to new research from CapitalBox, one of Europe’s largest online-only lending platforms, 23% of those that responded to its survey said they have been hit ‘very negatively’, whilst the other 43% ‘slightly’.

34% of businesses were unable to reinvest in their company to survive the recession, and 25% said they were unable to pay employees. A quarter also admitted to turning down work and client jobs.

The study also showed that 56% of UK SMEs have had to take out a loan or get financial support during the health crisis due to the consequences of multiple lockdowns, the increase in household savings and shift in consumer needs.

Additionally, 55% of SMEs applied for the government furlough scheme, 36% received tax relief and 43% leant on government loans.

The report, which assessed responses from a total of 1,750 SMEs across seven European countries, showed that British businesses had to take measures in order to cut costs and help them during the pandemic.

These cuts have included pausing or stopping future projects (36%), reducing staff hours (26%), reducing staff pay (25%), cutting office perks (25%), and reducing office space overheads (20%).

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On an industry level, the sector that has suffered the most across Europe is the hospitality and leisure sector – with 34% of SMEs in this space ‘very negatively’ impacted since the start of COVID-19. This is followed by those in utilities, agriculture, marketing and professional services, and construction.

“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,” Scott Donnelly, chief executive of CapitalBox, said. “They need the consistency of income and footfall.”

“Governments must make sure though 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, is essential.”

It comes as the toll of COVID-19 on small and medium-sized enterprises in the UK is set to exceed £126.6bn ($175.6bn) — nearly double the initial estimate of £69bn projected a year ago as the UK headed into lockdown for the first time.

According to a study by small business insurance provider Simply Business, on average, SMEs have lost £15,673 each so far in earnings due to the pandemic and subsequent lockdowns, up from the £11,779 small business owners initially estimated that COVID-19 would cost in May last year.

A year into the global pandemic, SMEs now fear they will lose a total of £22,461 each on average, suggesting there are still more losses to come. Almost one in 10 (8%) expect the pandemic to cost them over £50,000 in total.

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