A small business lender has claimed that although government loan schemes have saved companies, November’s economic decline shows that many will still collapse. As a result, the more resilient sectors must be prioritised.
In November, the UK’s gross domestic product contracted by 2.6 per cent as England entered its second lockdown and many businesses were forced to close.
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According to the Office for National Statistics, while the drop was less than the 5.7 per cent fall expected, the economy is now 8.5 per cent smaller than it was prior to the Covid-19 crisis.
Douglas Grant, director of Conister, which has so far lent £18m to small- and medium-sized enterprises (SMEs) through the coronavirus business interruption loan scheme (CBILS) and the bounce back loan scheme (BBLS), said the schemes have saved many businesses.
But he added that with the economy contracting, many will others will not survive, so the nation must focus on the most resilient business sectors.
“While the economic contraction in November was expected as most of the UK entered a second lockdown, the drop in output is still a cause for concern for many businesses and reflects the dire situation that they are now facing,” said Grant.
“We must now ensure that the financial security of those businesses that are sustainable can flourish in the future.
“Up until now, the BBLS and CBILS have performed a fundamental role in keeping many SMEs alive and acted as an important triage system to identify and support qualifying businesses needing credit.
“However, we believe that we have now passed this phase and we must recognise that many businesses will not survive this pandemic, particularly those with an unsustainable debt burden. It is imperative for the future that we now focus on identifying and protecting our most resilient business sectors.”