Race against time for UK small companies | Blog

As pubs and restaurants opened in the UK last weekend, we’ve heard mixed reports on how many customers returned. Either way, it doesn’t look like there was a mad rush back.

Most likely, they’ll see a repeat of the retail sector’s experience over the three weeks after they were allowed to open - things have picked up but not by much. Data from Springboard shows footfall in the high street is still less than 40% of what it was at the beginning of March. Retail parks are faring better but are still only seeing around 70% of the footfall they were before lockdown.

In George’s recent COVID-19 Insights piece he talked about the likely bifurcation in the fortunes of the very large companies and small ones, particularly in retail, hospitality and travel. It seems that his projection is playing out.

The Bank of England reported last week that, while SME’s had increased their net borrowing in May by £18.2 billion, large ones had paid off £12.9 billion of debt.

A recent ONS survey analysing the impact of COVID-19 paints a similar picture with the financial resilience of many small companies now being seriously tested. Of the 5,600 or so companies which responded, 14% were still not trading by mid-June. Of the 86% that were trading, 18% of their staff were still furloughed.

More worrying was companies’ assessment of their financial resilience. Of those businesses actually trading in mid-June, 44% said they have cash reserves to last less than six months. Including business that were still closed, close to half said they can’t survive more than six months given their current cash reserves.

The economy needs to pick up much more quickly if many of the UK’s smaller enterprises are to survive.

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