U.K. Urged to Act Fast to Save 250,000 Small Firms in Pandemic
(Bloomberg) -- At least 250,000 small companies in the U.K. are set to close in 2021 unless the government provides more assistance, threatening a further blow to an economy heading for a double-dip recession.
The warning from the Federation of Small Businesses Monday comes with the country back in lockdown to contain a resurgent coronavirus, hospitals at risk of being overwhelmed and job losses mounting. Lobby groups have said the 4.6 billion pounds ($6.2 billion) of emergency aid announced by Chancellor Rishi Sunak at the start of the lockdown is short of what’s needed.
“The development of business support measures has not kept pace with intensifying restrictions,” said FSB Chairman Mike Cherry. “We risk losing hundreds of thousands of great, ultimately viable small businesses this year, at huge cost to local communities and individual livelihoods.”
The FSB’s quarterly survey found confidence at the second-lowest level in its 10-year history, and just under 5% of the 1,400 firms questioned expect to close. There are about 5.9 million small businesses in the U.K., according to the government.
Sunak’s latest injection of funding adds to the 280 billion pounds it has cost the Treasury to support firms and workers through the pandemic so far. He has said that level of spending and borrowing isn’t sustainable, raising the prospect of tax rises once the crisis is over.
The new restrictions are due to run until mid-February at least, prompting Bloomberg Economics to predict a 4.5% contraction this quarter. Output probably fell in the final three months of 2020, capping the worst year for the economy in three centuries.
The FSB’s Small Business Index confidence measure stood at minus 49.3 at the end of December. Twenty-three percent of small firms cut headcount over the past quarter, while 14% expect to in the next three months. Official forecasts suggest unemployment could rise by almost a million by the summer.
“This government can stem losses and protect the businesses of the future, but only if it acts now,” Cherry said.
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