At least 250,000 UK small businesses set to fold without further help, claims new study

small business closing down research
Share this article

The Quarterly Small Business Index which surveyed a total of 1,401 firms paints a sorry picture of dwindling confidence and business closures. 2021 could be another tough year for business.

 

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.

Just under 5 percent of the 1,401 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.

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 reduced headcount 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. Official estimates show that 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 percent to an all-time high of 58 percent.

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.

“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.”

The FSB, via independent research company Verve, surveyed 1,401 small firms for the Q4 2020 Small Business Index at the end of December 2020. The survey covered a range of economic indicators including: small business confidence, employment and wages, exports, productivity, spare capacity, finance and investment.


Share this article