Record 250,000 small businesses set to close this year

The UK is on course to lose more than a quarter of a million businesses in the coming twelve months, according to a study from the Federation for Small Businesses.

The trade body for UK businesses surveyed 1,401 small firms at the ender of December, finding that just under 5 per cent of firms said that they expected to have to close this year.

The figure does not reflect the threat of closure faced by those hoping to survive the remainder of the pandemic despite having frozen their operations, reduced headcounts or taken on significant debt.

The proportion of businesses preparing to close down is at a record high for the FSB’s Small Business Index (SBI), which launched in the wake of the financial crash, and is more than double that recorded at the same point 12 months ago.

There are 5.9 million firms defined as ‘small’ across the UK, employing 16.8 million people according to the Department for Business, Energy and Industrial Strategy (BEIS).

The UK SBI confidence measure stands at -49.3, down 27 points year-on-year, the second-lowest in SBI history, second only to that recorded in March 2020 when the pandemic first hit.

The vast majority of those surveyed (80 per cent) said they do not expect their performance to improve over the next three months, as restrictions aimed at controlling the COVID-19 pandemic continue to take their toll.

Close to a quarter (23 per cent) of small firms have decreased the number of people they employ over the last quarter, up from 13 per cent at the beginning of last year, while one in seven (14 per cent) say they’ll be forced to cut numbers over the next three months.

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

Almost half (49 per cent) of exporters expect international sales to drop this quarter, up from 33 per cent at this time last year.

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.

“A record number say they plan to close over the next 12 months, and they were saying that even before news of the latest lockdown came through.”

He also called for bolder action from the government to help businesses through the latest lockdown measures and warned that action taken in March will be too late to stem closures.

“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,” 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. We’ve published a five-point plan to address gaps in the support landscape, and we look forward to the Treasury embracing it.”

“We also have to look again at how we treat emergency debt facilities over the coming months. Many of those who have borrowed significantly have done so in order to innovate. It would be a shame to lose the top businesses of tomorrow because of a failure to extend grace periods today.”

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