According to a poll by ACCA UK and the Corporate Finance Network, a huge 38% of SMEs believe they don’t have the resources to last until June.
This isn’t surprising as new research by Aldermore has revealed that the Covid-19 pandemic has led to a 34% loss in business income for millions of the UK’s small to medium-sized enterprises.
Whilst almost every industry has seen hardship, the toughest hit businesses have been those in the hospitality and leisure industry with an average loss of 53% of their income; followed closely by the food and drink industry with an average income loss of 49%.
Problems affecting SMEs
It’s not difficult to see why the outlook is so pessimistic. The coronavirus pandemic and subsequent lockdown measures have posed many problems for companies.
The number of unpaid UK business invoices has increased by 23% causing significant cash flow issues and many SMEs have struggled to apply for the Coronavirus Business Interruption Loan Scheme (CBILS) – only 25,262 loans have been approved out of 52,807 applications. Just recently we spoke about the fact that just 12% of applications for Government-supported loans have been approved for those in the construction sector with around 30% of applications having been refused, and 58% of companies still waiting to hear back.
The government’s Job Retention Scheme which has allowed businesses struggling through lockdown to furlough their staff at the government’s expense has provided some relief. But many businesses don’t know how they will cope once this scheme ends.
Similarly, many businesses are in rent arrears and are benefiting from the Government’s new Coronavirus Act 2020 which has stopped landlords being able to evict commercial tenants for not paying rent until 30th June 2020. However, the rent arrears will have to be paid back at some point and many businesses are currently racking up large amounts of debts in the meantime.
Around 55% of SMEs have decided to defer their tax payments but just 36% say they are likely to be able to meet these tax liabilities in six months’ time, putting their future in serious jeopardy.
HMRC debt can cause businesses a lot of problems, and failure to meet VAT or PAYE tax payments is often the first warning sign to HMRC that a business is insolvent.
Free, no obligation advice for SMEs
If you’re one of the many SMEs struggling through the coronavirus, you are not alone and we can help you.
As Licensed Insolvency Practitioners, Clarke Bell have been helping and providing advice for many businesses through this pandemic.
We can help find the best solution for your company.
Contact us for your free, no obligation advice – don’t struggle alone: 0161 907 4044 / [email protected]