FSB warns at least 250,000 small businesses will fail in 2021 if Government doesn’t act now

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FSB warns at least 250,000 small businesses will fail in 2021 if Government doesn’t act now

At least 250,000 small businesses could shut up shop for good this year, according to the Federation of Small Businesses. Confidence is at an all

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At least 250,000 small businesses could shut up shop for good this year, according to the Federation of Small Businesses. 

Confidence is at an all-time low and a record number of businesses revealed plans to close their firms in the coming 12 months, its latest Small Business Index shows. 

Meanwhile, one in five SMEs reduced staff numbers in the three months to December, with one in seven expecting to do so by March this year. 

SMEs were battered in 2020, as the coronavirus pandemic forced them to close their doors

SMEs were battered in 2020, as the coronavirus pandemic forced them to close their doors

It comes as the small business economy was battered in 2020, as the coronavirus pandemic gripped the nation and forced people to stay at home and shops to close their doors for a large chunk of the year.

And with a third lockdown underway, many fear even tighter restrictions will be enforced in the coming weeks.

Just under 5 per cent of the 1,400 firms surveyed for the study said they expect to close within the next 12 months, putting the UK on course to lose more than quarter of a million businesses.

The figure doesn’t even reflect the threat of closure faced by those still hoping to survive despite having frozen their operations, reduced headcounts or taken on significant debt.

Mike Cherry, national chairman of the Federation of Small Businesses, an organisation which represents the UK’s small and medium-sized businesses, said the development of business support measures have not kept pace with intensifying restrictions, and that as a result, we risk losing hundreds of thousands of small businesses.

He added: ‘A record number of small businesses say they plan to close over the next 12 months, and they were saying that even before news of the latest lockdown came through. This is a huge cost to local communities and individual livelihoods.

‘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 next lockdown with a whimper.’

According to the Department for Business, Energy and Industrial Strategy, there are 5.9million small firms across the UK.

Confidence among this bloodline to the economy is at one of its lowest points, standing at -49.3, according to the index. This is down 27 points annually. 

The only time in the index’s ten-year history when this was lower was in March 2020, when the first lockdown was implemented.

FINANCIAL SUPPORT AVAILABLE TO YOUR BUSINESS 

Do not miss out on financial support – check www.gov.uk/coronavirus/business-support to see what is available. Be aware that regional variations apply. 

1. One-off top up grant for leisure, hospitality and retail businesses 

This is granted to closed businesses and based on its premise’s rateable value. Grants are £4,000, £6,000 or £9,000. 

There is also a £594million discretionary fund for other businesses affected by lockdown. 

Applications should be made through the local council. 

2. Seiss 

The Self-Employed Income Support Scheme has been extended to cover the periods November 2020 to January 2021 and a second payment covering February to April next year. The first payment covers 80 per cent of average monthly trading profits or £7,500 (whichever is lower). Claims for the November to February grant must be made by January 29. 

3. Cbils 

Small businesses and sole traders with annual turnover of less than £45million can apply to the Coronavirus Business Interruption Loan Scheme for sums of up to £5million. The scheme is open until the end of March this year and you need to show that your usually viable business has been hit by coronavirus.

4. Deferred VAT 

If you had a VAT payment due between March 20 and June 30, 2020, you can defer payment until the end of March this year, or opt into the new VAT deferral scheme when it is launched. 

5. Coronavirus Bounce Back Loan 

You might be able to borrow between £2,000 and £50,000 if you are a small business or self-employed. The scheme is open until March 31. 

6. Local Restrictions Support Grant 

Businesses that were open as usual and then required to close due to local tier restrictions might be able to get a cash grant from their local council based on the rateable value of their property. It is available for every 14-day period a business was closed. Businesses that stayed open but were severely affected may also be eligible. 

7. Additional Restrictions Grant 

Available to supply chain and events businesses closed or affected adversely by lockdown. Details can be found via local councils. 

8. Business rates relief 

Businesses in the retail, hospitality and leisure sectors in England do not have to pay business rates for the tax year ending April 5, 2021. 

No hope for improvement 

Meanwhile, 80 per cent of those surveyed do not expect their performance to improve over the next three months. The current lockdown is due to be reviewed on 15 February.

Cherry said: ‘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.

‘Company directors, the newly self-employed, those in supply chains, and those without commercial premises are still being left out in the cold. Action in March will be too late to stem closures.’

Close to a quarter of firms reduced the number of their employees over the last quarter, up from 13 per cent at the beginning of last year, while a further one in seven said they’ll be forced to cut numbers over the next three months. 

What’s more, the proportion of small businesses forecasting a reduction in profitability for the coming quarter has also spiralled, rising from 38 per cent to 58 per cent. The figure is at an all-time high.

Exporting businesses are feeling extra pressure as the new EU-UK trade deal beds in, with almost half of them expecting international sales to drop between January and March.

Cherry added: ‘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.’

The Federation of Small Businesses has put together a five-point plan, to address the gaps in the current support landscape.

This includes further small business cash grants, a taxable grant for directors of limited companies and help for the more recently self-employed. 

The Federation of Small Businesses has put together a five-point plan to help small businesses, which it 'looks forward to seeing the Treasury embrace'

The Federation of Small Businesses has put together a five-point plan to help small businesses, which it ‘looks forward to seeing the Treasury embrace’

Meanwhile, SME accounting software FreeAgent, found from its own data that 1.74 million UK SME businesses had already been completely disrupted by the virus. 

Ed Molyneux, chief executive, said: ‘On top of this, nearly 300,000 SMEs were unsure if they qualified for government support. 

‘When we asked small business owners at the end of 2020 whether they thought enough had been done to help SMEs during the pandemic, less than a quarter of respondents said yes. 

‘While the UK government has created some positive initiatives such as the furlough scheme during this time of need, the fact that such a small number of SME owners say they feel adequately supported is a sign that this has simply not been enough.

Small Business Essentials

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