38% of SMEs won’t survive into June, poll says

38% of SMEs won’t survive into June, poll says

SMEs are continuing to suffer in lockdown as the UK economy grinds to a halt

38 percent of SMEs don’t believe they can access the cash needed to last four more weeks of lockdown, according to a poll by ACCA UK and the Corporate Finance Network.

The four-week look-ahead does present a slightly more optimistic outlook compared to the previous week, when over half (53 percent) of SMEs said they would be unable to access the cash needed to survive in lockdown.

“There’s absolutely no question that cash is king. Cash is at the forefront of everything,” says Simon Michaels, CEO of HW Fisher Business Solutions. “If you speak to any of the SMEs, as I’ve done over the last few weeks, the one thing that they’re concerned about is running out of cash. The days of ‘how much profit are we going to make?’ and things of that sort seem to have gone into the dim and distant past.”

Michaels adds that the figures reported by ACCA UK and the CFN broadly reflects what he is seeing on the ground.

“I agree with this high percentage. A number of businesses that we’re seeing are saying, if they don’t get the support, if they don’t get the loan, they won’t survive,” he says.

Michaels believes the problems stem from the “cumbersome” process of applying for a CBILS loan, where only 25,262 loans have been approved out of 52,807 applications. However, there were signs that the bounce-back loan scheme (BBLS), which went live on Tuesday May 5, 2020, was beginning to bring SMEs the cash they needed at pace, with Michaels describing it as “very quick”.

It is widely expected that Prime Minister Boris Johnson will announce some sort of easing of lockdown this Sunday, and Michaels believes the government now has to start looking at “phase two” or “post-coronavirus” planning for businesses.

“If you think about what’s been put in place, we’ve got the furlough which is a grant – very nice, that works very well. But think about what else has been put in place. We’ve got the bounce back loan, and we’ve got the CBILS. We’ve got deferral of VAT and we’ve got deferral of things like personal tax.

“But what happens in the early part of next year, in the first or second quarter of next year, if we put out more debt for these businesses, how can they afford to pay it back when they do come out of the lockdown, post- coronavirus era?”

“I think we have to be mindful that businesses can only take so much debt,” he adds.

Claire Bennison, head of ACCA UK said in a statement that while furlough had offered “respite” for SMEs, they were still in a dangerous position. Like Michaels, she urged greater preparation for a post-COVID economy.

“Some SMEs are no better off. While the furlough scheme has offered some respite, many small businesses need to be prepared for when the scheme ends in June. SMEs need to be thinking about the long term too, as cash needs to be in place post-furlough,” she said.

However, Michaels is concerned that the furlough scheme would abruptly end in June, leading to mass redundancies.

“People are already starting to think about that [redundancies],” he says. “I think unfortunately people are not going to be able to survive.

“I don’t believe the revenue line is going to come back in line with where it needs to be. And therefore, the cost base is going to have to be driven down. And in service businesses, people businesses, the biggest cost is staff.”

Resources & Whitepapers

Why Professional Services Firms Should Ditch Folders and Embrace Metadata

Professional Services Why Professional Services Firms Should Ditch Folders and Embrace Metadata

2y

Why Professional Services Firms Should Ditch Folde...

In the past decade, the professional services industry has transformed significantly. Digital disruptions, increased competition, and changing market ...

View resource
2 Vital keys to Remaining Competitive for Professional Services Firms

2 Vital keys to Remaining Competitive for Professional Services Firms

2y

2 Vital keys to Remaining Competitive for Professi...

In recent months, professional services firms are facing more pressure than ever to deliver value to clients. Often, clients look at the firms own inf...

View resource
Turn Accounts Payable into a value-engine

Accounting Firms Turn Accounts Payable into a value-engine

2y

Turn Accounts Payable into a value-engine

In a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...

View resource
Digital Links: A guide to MTD in 2021

Making Tax Digital Digital Links: A guide to MTD in 2021

2y

Digital Links: A guide to MTD in 2021

The first phase of Making Tax Digital (MTD) saw the requirement for the digital submission of the VAT Return using compliant software. That’s now behi...

View resource