A record number of small business owners are planning to close their firms over the coming year, putting the UK on course to lose more than a quarter of a million businesses, according to the Federation of Small Businesses (FSB).
Almost 5% of the 1,400 firms surveyed for the FSB’s Small Business Index (SBI) study say they expect to close in 2021. The 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.
The proportion is at an all-time high in the SBI, and is more than double that recorded at the same point 12 months ago. There are 5.9 million small firms across the UK employing 16.8 million people, according to government figures.
Close to a quarter (23%) of small firms 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 proportion of small businesses forecasting a reduction in profitability for the coming quarter has spiralled over the past year, rising from 38% to 58%. The figure is at an all-time high.
FSB National Chairman Mike Cherry said: “The development of business support measures has not kept pace with intensifying restrictions. 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.
“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.”
He added: “We also have to look again at how we treat emergency debt facilities over the coming months. Many of those who have borrowed significantly have done so in order to innovate. It would be a shame to lose the top businesses of tomorrow because of a failure to extend grace periods today.
“All the while our exporters are trying to get across what a new EU-UK trade agreement means for them without the cash they need to make adjustments. Direct funding to help them manage new obligations in the form of transition vouchers is urgently needed.
“This government can stem losses and protect the businesses of the future, but only if it acts now.”