250,000 small UK firms seen closing without more financial aid

At least 250,000 small British firms could close as government emergency aid package falls short, industry group warns.

The Federation of Small Businesses' quarterly survey found confidence at the second-lowest level in its 10-year history [File: Simon Dawson/Bloomberg]
The Federation of Small Businesses' quarterly survey found confidence at the second-lowest level in its 10-year history [File: Simon Dawson/Bloomberg]

An industry group says at least 250,000 small firms in the United Kingdom could close unless the government gives them more financial help.

The Federation of Small Businesses’s (FSB’s) warning on Monday comes after authorities imposed renewed lockdown measures to contain a highly infectious strain of coronavirus and as the UK heads towards its second recession in as many years.

Lobby groups say the 4.6 billion pounds ($6.2bn) announced by Chancellor Rishi Sunak as emergency aid at the start of the lockdown is not enough.

“The development of business support measures has not kept pace with intensifying restrictions,” said FSB Chairman Mike Cherry in a statement. “We risk losing hundreds of thousands of great, ultimately viable small businesses this year, at huge cost to local communities and individual livelihoods.”

The FSB’s quarterly survey, the Small Business Index (SBI), found confidence at the second-lowest level in its 10-year history. Slightly less than 5 percent of the 1,400 firms questioned expect to close.

Government data show that there are about 5.9 million small businesses in the UK employing about 16.8 million people.

The SBI confidence measure is at minus 49.3, down 27 points year-on-year, the second-lowest in SBI history, after the one recorded in March 2020. Of those surveyed, 80 percent said they do not expect their performance to improve over the next three months; 23 percent said they have laid off staff over the last quarter, up from 13 percent at the beginning of last year; and 14 percent said they will be forced to cut numbers over the next three months.

Moreover, the proportion of small businesses that expect profits to shrink in the upcoming quarter has shot up from 38 percent a year ago to 58 percent now, an all-time high.

The UK is in lockdown until at least mid-February, prompting Bloomberg Economics to predict a 4.5 percent contraction this quarter. Output probably fell in the final three months of 2020, capping the worst year for the economy in three centuries.

“This government can stem losses and protect the businesses of the future, but only if it acts now,” the FSB’s Cherry said, adding that the support mechanisms at the start of the first national lockdown were “an exceptionally good starting point” while the measures announced for this second lockdown are “a whimper”.

Source : Al Jazeera and News agencies

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