Coronavirus: At least 250,000 small firms face collapse without further government help, report warns

Record number of small firms faced going under even before third lockdown, Federation of Small Businesses says

Research shows that high streets in Scotland have suffered the largest reduction in the number of occupied shops anywhere in the UK (Jeff J Mitchell/Getty Images)

At least 250,000 small businesses will collapse unless the government offers more sufficient help to endure its coronavirus restrictions, a new report warns.

The Federation of Small Businesses (FSB) survey of 1,400 firms suggested a record number of businesses were planning to close over the next year, while exporters faced being pushed to the brink as they navigated the UK’s new post-Brexit trade arrangement with the EU.

The proportion of small businesses forecasting a reduction in profitability for the coming quarter has spiralled over the past year to an all-time high of 58 per cent, while half of exporters expect their international sales to drop in the next few months – up from a third this time last year, the report suggested.

The research also showed that one in five small firms cut jobs in the last three months of 2020, with one in seven expecting to do so in the current quarter, the FSB said.

The government’s development of business support measures has failed to keep pace with intensifying restrictions to stem the pandemic, FSB chair Mike Cherry said – branding the support for small firms during the second lockdown as a mere whimper.

“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,” Mr Cherry said.

“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.

“There are meaningful lifelines for retail, leisure and hospitality businesses, which are very welcome as far as they go, but this government needs to realise that the small business community is much bigger than these three sectors.

“Company directors, the newly self-employed, those in supply chains and those without commercial premises are still being left out in the cold.”

At the start of 2020, some 99.3 per cent of the UK’s six million businesses were small firms. Together, they employed 13.3 million people, with a combined turnover of £1.6 trillion.

A Business Department spokesperson said: “We understand these are extremely challenging circumstances for businesses, which is why we have put in place one of the most comprehensive and generous packages of business support in the world worth £280bn.

“This includes a new one-off grant worth up to £9,000, VAT relief, various loan schemes, a business rates holiday as well as the extended furlough scheme.”

Additional reporting by PA