UK SMEs face complicated recovery

UK SMEs face complicated recovery

Research highlights disparity between SMEs across the UK as they begin to emerge from lockdown

UK SMEs face complicated recovery

Over one-third of small-to-medium sized businesses (SMEs) have been “completely disrupted” by the pandemic, according to new research by FreeAgent.

Overall, 87 percent of surveyed SMEs said their business had suffered due to coronavirus, with further research suggesting that SMEs are all at different stages of recovery as the UK begins to emerge from lockdown.

ACCA UK and the Corporate Finance Network’s SME Health Tracker found that 40 percent of SMEs receiving government Bounce Back Loans aren’t receiving enough to cover liabilities for the next 12 months.

Additionally, 68 percent of SMEs are deferring their tax payments, although the majority do expect to pay these tax liabilities back within six months.

“I think people are worried about what happens when the government support ends,” says Gurpreet Sandhu, director of accounting firm 3 Wise Bears.

While some of Sandhu’s client base has been hit hard by coronavirus, he noted that those within the e-commerce sector found some success during lockdown, highlighting the differences each SME is facing.

“I know that a lot of them were planning to make redundancies from July, but the government extended the support up until October, so some of those redundancy decisions have now been delayed – but they could just come back later,” Sandhu says, speaking of his clients. “A lot of it is going to depend on how people react after the lockdown stops.”

According to new YouGov research commissioned by SAP Concur, 73 percent of UK SMEs expect to return to normal practice within 12 months.

Over half of YouGov-surveyed businesses also anticipated their finance function returning to normal within the year, with a bold 38 percent expecting that normalcy ‘straight away.’

Interestingly, 69 percent of YouGov respondents believe the UK is approaching a major recession, and 77 percent expect small businesses to struggle with cash to survive the pandemic.

However, the SME Health Tracker found that only 27 percent of SMEs have reviewed their financial forecasts and planning with coronavirus in mind.

“There is one school of thought, where you think that we’re going to face some kind of economic hit at least, if not ruin, for a lot of businesses,” Sandhu says. “So do they just take that now and start to recover from now?”

YouGov research also found that nearly one-fourth of small businesses haven’t seen a change in their expenses, and the majority (57 percent) have seen the number of expenses submitted decrease. However, the cost of office equipment, software and household costs have all risen during lockdown.

The overall change in working practices was ‘easy’ for 68 percent of YouGov-surveyed companies, although small businesses did lag behind the enterprise market ‘substantially.’

However, the SME Health Tracker found that despite this positive transition, 70 percent of SMEs report being more stressed than normal, with 14 percent feeling ‘unable to cope.’

“A key issue for policy makers will be about the provisions that could be offered to prevent a bottleneck of financial liabilities among small businesses that may be struggling to resume operations,” Claire Bennison, head of ACCA UK, said in a statement.

“SMEs need ongoing backing to handle what is essentially a credit crunch storm coming – they need clarity and support for the future.”

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