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SME customers showing signs of coronavirus impact

The pandemic has hit many small and medium-sized businesses and they are showing signs of caution and distress

The channel’s key SME customer base has had a tough time during the coronavirus pandemic and there are signs that the third quarter has caused many to reflect on their growth prospects.

Findings from BVA BDRC in its latest SME Finance Monitor indicate that three-quarters of small and medium-sized enterprises (SMEs) have been negatively affected by Covid-19, with 35% sating things have been really tough.

When asked, 40% of SMEs felt the worst was still to come, although the number of those that expected income to drop by half or more had reduced from 60% in the second quarter to 30% in the three months from July to September.

More of the channel’s customer base are now looking to the future, having dealt with the immediate threats, but many are concerned by unforeseen challenges. The virus is still present and Brexit is looming.

“The third-quarter results reflect both the stresses SMEs have faced, especially those in the hospitality sector, and the improved mood during the summer months before the second Covid-19 wave developed – also reflected in the GDP figures,” said Shiona Davies, a director at BVA BDRC and editor of the SME Finance Monitor.

“There have been improvements since the second quarter, but many SMEs remain cautious about their future. This is also reflected in the interim data for October and November, which will be published in due course,” she added.

Last month, the most recent Business Distress Index from RealBusinessRescue.co.uk indicated that 36,000 SMEs were in significant financial distress, potentially putting 82,000 jobs at risk.

“While some bigger companies are finding their feet in this recession, it is the smaller companies that are suffering the biggest impact. With the pandemic having pushed more than 40,000 into financial distress, the backbone of the UK’s economy is suffering and we could soon have a dangerously top-heavy economy. To put that figure of 40,000 more distressed SMEs into context, there were just over 17,000 corporate insolvencies in 2019 as a whole,” said Shaun Barton, national online business operations director at RealBusinessRescue.co.uk.

“The role of these smaller companies is key, not only as suppliers with a vast array of important innovations, but as employers to millions of talented people, and will be vital to funding the economic recovery after the world has either adjusted to, or found a solution to, coronavirus,” he added. “Both SME and startup IT businesses are integral to the future of a technologically enabled UK.”

The pandemic has taken a terrible toll on certain sectors of the UK economy, particularly retail, with Debenhams and the Arcadia Group the latest to reveal they are in trouble, putting a combined 23,500 jobs at risk.

Meanwhile, the Organisation for Economic Co-operation and Development (OECD) has warned that the UK is set to come out of the pandemic in one of the worst global positions. The economic body is forecasting a 6% shrinkage in the UK economy, compared to its pre-Covid levels, by the end of next year.

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