Micro-businesses expect to lose half their annual turnover due to coronavirus

Almost 70% of the UK’s smallest businesses expect to lose more than half of their annual turnover due to the coronavirus crisis, according to research by the University of Sheffield conducted in association with Small Business Britain.

The survey focuses on micro-businesses – defined as companies with up to nine employees – which account for 96% of the UK’s total business population, contribute £533bn to the economy and collectively employ more than nine million people.

Academics from the University of Sheffield’s Management School surveyed over 1,500 micro-business owners to assess the resilience of the UK’s most vulnerable firms, many of which feel they have been overlooked amid the Covid-19 pandemic.

They found 67% are now ‘very’ or ‘somewhat’ lacking in confidence, with just two per cent very confident about their prospects, believed to be some of the worst figures on record.

More than three quarters (78%) said cash flow was their biggest problem, followed by a drop in customer demand (58%) and difficulty accessing finance (27%). The overwhelming majority (93 per cent) do not have any insurance to mitigate losses caused by the Covid-19 pandemic.

However, some micro businesses have been able to change their business models by shifting their operations online. One in three are looking to sustain their businesses by going online, while around a quarter (26%) are offering new products or services and tapping into emergency funding (24%).

The research shows that micro businesses take a positive view of the government’s business support package, but are concerned about the uncertainty around local delivery and how quickly they will receive financial aid – with many fearing they will collapse before support reaches them.

Professor Tim Vorley, Chair in Entrepreneurship at the University of Sheffield, who led the study, said: ‘Much of the government’s focus so far has been on SMEs and larger companies, but micro businesses represent a significant proportion of our economy, and are especially vulnerable to this unprecedented socio-economic shock.

Dr Cristian Gherhes, a Research Associate at the University of Sheffield, said: ‘Our research is revealing that confidence among the UK’s smallest businesses is at rock-bottom, with most expecting to see more than half of their gross income wiped out by the coronavirus crisis.

‘Most of these businesses don’t want to give in to the pressure of the pandemic. But they urgently need further support and clarity over when funds are going to be made available if they are to survive the crisis.’