Record 250,000 small businesses could go bust in the next 12 months as firms struggle amid coronavirus crisis, warn industry bosses

  • Federation of Small Businesses study finds 250,000 firms feel unable to carry on
  • Number is the highest since FSB began collecting data following financial crisis
  • Doesn't include thousands more of small firms struggling but hoping to continue

At least 250,00 small businesses across the UK are set to fold unless they are given more help to fight through the pandemic, industry leaders have warned.

A record number of companies have said they are planning to shut up shop over the next 12 months, according to a survey from the Federation of Small Businesses (FSB), as they feel unable to carry on.

This number, the highest since the FSB began collecting data in the aftermath of the financial crisis, does not include thousands more of the UK's 5.9 million small firms which are struggling but hope to continue trading.

A sign notifying customers that a shop is closed in Oxford last week. At least 250,000 UK small businesses are set to fold unless they are given more help to fight through the pandemic

A sign notifying customers that a shop is closed in Oxford last week. At least 250,000 UK small businesses are set to fold unless they are given more help to fight through the pandemic

Mike Cherry, national chairman of the FSB, said: 'The development of business support measures has not kept pace with intensifying restrictions.

'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.' 

The pressure being piled on by the pandemic poses a risk for the 16.8 million people who work in small companies across the UK.

In the three months to December, one in five firms surveyed by the FSB had axed staff, and one in seven expect to do so over the first three months of this year.

The worrying number of redundancies comes as the latest lockdown is expected to put millions more employees back on furlough, with the taxpayer covering the lion's share of their wages.

The scheme has already cost the Treasury more than £46 billion, and is still spiralling higher.

Mike Cherry, national chairman of the Federation of Small Businesses, said the development of business support measures 'has not kept pace with intensifying restrictions'

Mike Cherry, national chairman of the Federation of Small Businesses, said the development of business support measures 'has not kept pace with intensifying restrictions'

The Institute for Employment Studies (IES) thinks school closures could ramp up the number of people using the furlough scheme to between 5 million and 6 million - even more than during the second lockdown in November.

This is up from an estimated 3 million at the end of December, and would hit levels last seen in July at the end of the first lockdown.

John Philpott, a labour market economist, told the Sunday Telegraph: 'The prospect of a vaccine route out of lockdown later this year will give a boost to furloughing by offering firms an opportunity to hold fire on longer-term staffing decisions until the actual business outlook becomes clearer.' 

But Mr Cherry said small businesses needed more support than just furlough. 'At the outset of the first national lockdown, the UK Government was bold,' he said.

'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 latest lockdown with a whimper.' 

An empty high street in Shrewsbury last Thursday during England's third national lockdown

An empty high street in Shrewsbury last Thursday during England's third national lockdown

While he welcomed the grants of up to £9,000 for retail, leisure and hospitality businesses, Mr Cherry said the Government 'needs to realise that the small business community is much bigger than these three sectors'.

He added: 'Company directors, the newly self-employed, those in supply chains, and those without commercial premises are still being left out in the cold.' 

He advocated loosening repayment terms on emergency loans, so firms can focus on surviving without being bogged down by debt, and giving funding to exporting businesses so they can take advice on how to trade with the EU under new Brexit rules.  

A Business Department spokesman said: 'We understand these are extremely challenging circumstances for businesses, which is why we have put in place one of the most comprehensive and generous packages of business support in the world worth £280 billion.

'This includes a new one-off grant worth up to £9,000, VAT relief, various loan schemes, a business rates holiday as well as the extended furlough scheme.'

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