Small businesses and manufacturers are gearing up to fight for their survival this year, according to new survey data, as they negotiate the double threat of Covid-19 and weaker post-Brexit trade with the EU.
According to a quarterly survey by the Federation of Small Businesses (FSB), more than 250,000 small businesses expect to fold without further financial support from the government.
The manufacturers’ trade body Make UK said its members expected investment in the UK to drop and find it more difficult to recruit talent.
Just under 5% of the 1,400 businesses polled by the FSB said they plan to close this year, the largest proportion in the history of the commercial institution’s small business index, established following the 2008 bank crash.
If the same degree of pessimism applies to the UK’s 5.9 million small businesses, that would suggest 295,000 people fear bankruptcy.
The vast majority of companies surveyed, 80%, did not expect their outlook to improve in the next three months, with tight foreclosure restrictions likely to remain in place.
Almost a quarter had cut staff in the past three months, while one in seven expected to do so by the end of March, raising question mark over the future of 16.8 million of people working for small businesses.
FSB National President Mike Cherry said the amount of government support available had dwindled as the pandemic raged.
“At the start of the first nationwide lockdown, the UK government was bold,” he said. “The support mechanisms put in place were not perfect, but they were an exceptional starting point. That’s why it’s so disappointing that he encountered this lockdown with a whimper.
He praised the support for retail, leisure and hospitality businesses, but said many were ‘still being left behind’, including business leaders, new self-employed workers, supply chains and businesses without commercial premises.
The FSB has released a five-point plan to help small businesses, including grants, income support, and extended debt relief.
But he warned companies were already running out of cash to cope with a tough business environment, especially given the costs associated with adjusting to the UK’s new trading relationship with the EU.
Almost half of FSB members expect international sales to drop, down from 33% last year.
And survey data from Make UK, in partnership with accounting firm PwC, indicates that its members feel the same about the post-Brexit challenge.
A third of companies said they expected UK business investment prospects to decline after leaving the EU, with just 18% of companies believing they will improve.
Just over a quarter believed exports to the EU would fall, with only 16% believing they would increase, while a third believed the UK’s ability to attract international talent would decline.
Customs delays, cited by 47% of businesses, are seen as the biggest risk for businesses, while concerns about national and local lockdowns were the second biggest risk at 46%.
Make UK Managing Director Stephen Phipson said: “The transition to new trade deals with the EU was always going to be the biggest challenge manufacturers face this year and the fact that we have an agreement in place n ‘does not change anything. ”
He called for a bold industrial strategy that goes beyond “short-term tinkering”, instead laying out a plan for the next decade.
As businesses expressed concern about the future, a corporate production tracking index fell to its lowest level on record, even below the post-banking recession.
The BDO Production Index, which measures economic data from major UK business surveys, averaged 73.62 in 2020, well below the previous low of 83.28 recorded in 2009.
“These numbers reinforce the severity of the economic impact of the pandemic,” said Kaley Crossthwaite, BDO partner.
“As we enter a third national lockdown, crippling challenges will continue to plague businesses in the weeks and months to come.
“The successful and rapid deployment of the Covid-19 vaccines will be the main driver of the resumption of activities.”