Support needed to save 250,000 small businesses says FSB
By Rob Freeman | 11th January 2021
At least 250,000 small businesses in the UK will fold without addition support according to a new study from the Federation of Small Businesses.
And the FSB's Small Business Index put confidence at its second lowest ebb through the report's 10-year history.
The study found close to five per cent of the 1,400 businesses surveyed expected to close in the year ahead - the highest proportion on record and more than double the rate from 12 months ago.
Expanded across the 5.9 million small firms in the UK, that rate would amount to around 250,000 closures with many more hoping to survive by freezing operations, reducing head counts or taking on significant debt during the pandemic.
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."
The UK SBI confidence measure stands at minus 49.3 - down 27 points from last year and only above the level record in March 2020.
Eighty per cent of those surveyed (do not expect their performance to improve over the next three months.
Twenty three per cent have cut staff numbers in the last quarter - up from 13 per cent at the start of last year - while one in even believe they will be forced to cut numbers over the next three months.
The proportion of small businesses forecasting a reduction in profitability for the coming quarter has grown from 38 per cent to a record 58 per cent in the last year, while 49 per cent of exporters expect international sales to drop this quarter, up from 33 per cent at this time last year.
"At the outset of the first national lockdown, the UK Government was bold," said Mr Cherry. "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 the small business community is much bigger than these three sectors."
The FSB has published a five-point plan to address gaps in the coronavirus support which calls small business cash grants, a revenue loss scheme, director's income support scheme, help for more recently self-employed and an emergency loans extension.
"Company directors, the newly self-employed, those in supply chains, and those without commercial premises are still being left out in the cold," he said.
"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.
"This Government can stem losses and protect the businesses of the future, but only if it acts now."
Gloucester MP Richard Graham said he agreed with parts of the FSB's five-point plan and was hoping to raise them with Chancellor Rishi Sunak in the House of Commons
He said: "Accountants confirm that while some small businesses are doing well many others are in trouble.
"The Government's latest package specifically helps hospitality, leisure and events sectors but there are other situations which need help.
"I have particular sympathy for the recently self-employed and would be delighted if the Government can include 2019-20 tax returns for eligibility for the self-employed scheme. I agree with an extension of the loan repayment period."
He said the Director's Support Scheme was a more controversial recommendation.
"This should focus on directors for whom the business is their sole source of income," he said.
"I do think there will have to be fairness about levels of National Insurance paid by directors and employees.
"Overall, I hope the Chancellor gives the FSB proposals a fair wind, in order to ensure as many businesses as possible are still able to maintain and create jobs when there are no barriers to business going full steam ahead."
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