Record number of small businesses set to close

At least 250,000 UK small businesses are set to fold without further financial help from the government, according to a new survey.

The study by the Federation of Small Businesses (FSB) warns that one in five firms reduced headcounts in three months to December, and one in seven expect to do so in the first quarter of this year.

A survey of 1,400 firms for the FSB found just under 5% say they expect to close this year.

But the FSB adds this figure does not reflect the threat of closure faced by those hoping to survive despite having frozen their operations, reduced headcounts or taken on significant debt.

And close to a quarter (23%) of the small firms surveyed have decreased the number of people they employ over the last quarter, up from 13% at the beginning of last year.

One in seven (14%) say they’ll be forced to cut numbers over the next three months.

The government estimates that 16.8 million people work in smaller firms across the UK.

The proportion of small businesses forecasting a reduction in profitability for the coming quarter has spiralled over the past year, rising from 38% to 58%.

And almost half (49%) of exporters expect international sales to drop this quarter, up from 33% at this time last year.

‘The development of business support measures has not kept pace with intensifying restrictions,’ said FSB chairman, Mike Cherry.

‘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. 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,’ he added.

‘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.’

Photo Credit – EliFrancis (Pixabay)