Written by: Keith Tully
As many as 250,000 small firms could close this year unless government action is taken to prevent such a scenario from happening.
That’s according to the Federation of Small Businesses (FSB), whose surveys suggest that optimism is in exceptionally short supply among companies across the UK in the early weeks of 2021.
Indeed, a record number of business bosses have said they are likely to close this year, with hundreds of thousands of firms potentially on the verge of ceasing to exist.
Around 5 per cent of the 1,400 companies polled by the FSB recently said that they intend to close this year, with potentially many more threatened with closure despite having temporarily ceased their operations, reduced their workforces and taken on extra debt in recent months.
The proportion of businesses that could soon close was roughly twice as high at the end of 2020 as was the case at the end of December 2019.
Meanwhile, a significant proportion (23 per cent) of the companies polled by the FSB said they had been forced to reduce the scale of their workforce during the final few months of last year.
Financial conditions have clearly deteriorated as the Covid crisis continues to hammer the UK economy, with most small businesses (58 per cent) now expecting to see their profits reduced in the first quarter of 2021.
From the perspective of the FSB, it has become a matter of huge importance that the government find ways to provide practical support to small firms in financial distress.
“The development of business support measures has not kept pace with intensifying restrictions,” said FSB national chairman Mike Cherry in a statement.
“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,” he added.
Mr Cherry also noted in his remarks that while the government’s support for operators in the retail, leisure and hospitality sectors is welcome “the small business community is much bigger than these three sector”.
“This government can stem losses and protect the businesses of the future, but only if it acts now,” he said in conclusion.