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Frustrated owner sitting at table in closed cafe, small business lockdown due to coronavirus.
January 11 2021

250,000 small businesses risk closure without further help

Kathryn Gaw News, SME News, Top 3 FSB, Mike Cherry, Rowena Howie, Small Business Index

The Federation of Small Businesses (FSB) has warned that at least a quarter of a million small businesses will fold in the year ahead unless more help is given.

The warning followed the release of the latest Small Business Index (SBI), which showed that confidence among small business owners was at its second lowest ebb in the report’s 10-year history.

According to the SBI, small business confidence is at -49.3. That marks a reduction of 27 points year-on-year. Meanwhile, the London Small Business Index stands at -61.

Read more: 90pc of SMEs want more government support

80 per cent of the small business owners surveyed said that they do not expect their performance to improve over the next three months.

“The fear of at least 50,000 London businesses folding in the capital, based on this fresh FSB data, is extremely worrying,” said Rowena Howie, FSB London policy chair.

“Company directors, the newly self-employed, those in supply chains, and those without commercial premises are still being left out in the cold. Action in March will be too late to stem closures.”

Just under five per cent of the businesses surveyed said that they expect to close this year. The Department for Business, Energy and Industrial Strategy has estimated that there are 5.9m small businesses in the UK, suggesting that 295,000 small companies could be at risk of closure.

Almost one quarter (23 per cent) of small firms told the FSB that they have reduced their headcount, with 14 per cent saying that they will be forced to cut staff numbers over the next three months.

58 per cent of small businesses forecast a reduction in profitability over the coming quarter, while nearly half (49 per cent) of exporters expect international sales to drop this quarter.

Read more: 30pc of SMEs think Brexit will have negative impact

“The development of business support measures has not kept pace with intensifying restrictions,” said the FSB’s national chairman Mike Cherry.

“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.

“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.”

Read more: MarketFinance to make £5,000 grants available to UK businesses

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