The scale of debt accumulated by small businesses during the pandemic has left high streets across the UK potentially facing the prospect of a “tsunami of closures” in the coming months.
That’s according to a report commissioned by Bill Grimsey, formerly the boss of Wickes and Iceland, who has been encouraging investigations into the prospects for high street operators.
Many thousands of shops, hairdressers, bars and restaurants, are understood to be facing a battle for survival with their finances clearly in serious trouble.
Restrictions relating to Covid-19 have been eased in recent weeks and months but the challenges of recent quarters have clearly taken a heavy toll on a wide variety of businesses based on UK high streets.
Even beyond rent arrears, which have been stacking up nationwide, estimates are that the scale of debt owed collectively by small scale retailers has increased very significantly since early 2020.
The latest figures suggest 150,000 such businesses have seen their collective debt levels increase from around £500 million to more than £2.3 billion over the course of the Covid crisis.
Accumulation of debt as a means of surviving the pandemic among high street businesses has left many “teetering on the brink” of insolvency, according to Mr Grimsey.
“Urgent support is required to stop a tsunami of closures,” he said.
“Given there are almost 150,000 small independent businesses out there that face five times the debt they had going into the pandemic, there is going to be a significant number of business failures and a large part of that debt will default,” he added.
“These people need urgent help and understanding and should be seen as a critically important cohort of independent businesses at the heart of communities up and down the country.”
Recent figures from the British Retail Consortium (BRC) showed that the UK’s retail businesses managed a record breaking 13.1 per cent year on year sales increase in June this year.
However, those numbers reflect comparisons to a month during which much of the British economy was unable to operate normally and the BRC has said “strong headwinds” are still in evidence for retailers in summer 2021.