More than a fifth of small businesses expecting ‘much worse’ performance in 2020
More than a fifth of the UK’s small businesses expect their performance to be “much worse” over the next three months, after an unprecedented wave of job losses dampened their prospects.
Hiring activity, profits and exports across small firms hit an all-time low in the second quarter, with 23 per cent of businesses having cut jobs as the coronavirus pandemic weighs on revenues.
A record high of three quarters of small businesses said that profits fell in the last three months, up 33 percentage points compared to the same quarter in 2019.
The vast majority (82 per cent) said they are still operating below capacity, according to the latest quarterly index from the Federation of Small Businesses (FSB).
However some firms were more optimistic, with one in 10 firms saying they believe their prospects to be “much improved” compared to last quarter.
Four in 10 said they expect a relative improvement as lockdown restrictions lift, with those in the construction and accommodation and food service sectors among the most confident.
Among the least confident are those in the wholesale and retail and arts and entertainment sectors, where only 13 per cent and two per cent respectively think they may see an uplift in performance next quarter.
“The majority of small business owners have benefited from the government’s emergency support measures but many have not. We urgently need to see the Treasury outline how it intends to support those who have been left out,” said FSB chairman Mike Cherry.
“We have to avoid a scenario where those who’ve received support are able to navigate choppy economic waters over the months ahead while others are left to sink.”
The index showed a surge in applications from small businesses for fresh funding, with one in three seeking new facilities over the past three months, up 20 percentage points on the same period last year.
The success rate for such applications hit an all-time high at 81 per cent, as has the proportion of businesses being offered borrowing rates at under four per cent (85 per cent).
Cherry added: “The [bounce back loan scheme] has been a clear success, facilitating more than 1m loans to small firms in need. Those businesses now need reassurances about the future as they look to realise their full potential.
“A guarantee that they won’t have to start making repayments until they’re turning a profit would give them the confidence to invest and hire today, rather than further down the line when such activity may prove too little too late.”