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SMEs bootstrapped by social distancing requirements

Small to medium sized businesses (SMEs) will struggle to trade if social distancing measures continue, finds the latest results from the ACCA UK and The Corporate Finance Network (The CFN) SME Health Tracker.

Accessing a survey pool of accountants representing nearly 9,000 SMEs across the UK, the findings show that on average 16% of SMEs said they think social distancing will make it impossible or unviable to reopen their business – equaling around 1,500 SMEs represented across this research pool.

Alarmingly, only 27% of SMEs have written financial forecasts or business plans that have been reviewed as a result of the Covid-19 outbreak.

Compounding cashflow concerns, feedback also reveals ongoing worries about accessing finance some 13 weeks into lockdown. For accountants who have made enquiries for the Coronavirus Business Interruption Loan Scheme (CBILS) on behalf of their clients, 37% have been approved, and 21% declined. A third of accountancy respondents said their experience of applying for CBILS has affected their clients’ appetite for further applications, putting them off from doing so.

As small businesses also look to funding through the alternative Bounce Back Loan Scheme, 40% of SMEs report that their Bounce Back Loan amount will not be enough to meet their liabilities over the next 12 months.

Tax deferments are still being used as a stop gap, with 68% of SMEs deferring. Of those, 67% say it’s likely they can meet their tax liabilities in six months.

The Tracker’s ongoing questions about wellbeing reveal continued stress for SMEs. Practitioners report 70% of their clients are feeling more stressed and anxious than usual, with 14% feeling unable to cope.

Kirsty McGregor, founder of The CFN says: ‘What’s filtering through in this week’s results is a sense that the Bounce Back Loans have worked compared to CBILs. Most of the Bounce Back Loans have been accepted and turned around quickly, which is great news. But the 40% who don’t think this will stretch to meet their needs is concerning. Debt is a massive issue for the future, something which needs careful handling.’

Lloyd Powell, head of ACCA Cymru Wales says:

“Tax deferrals, cashflow, late payments and incoming future liabilities are all part of a growing uncertain picture for SMEs. A key issue for policy makers will be about the provisions that could be offered to prevent a bottleneck of financial liabilities among small businesses that may be struggling to resume operations. SMEs need ongoing backing to handle what is essentially a credit crunch storm coming – they need clarity and support for the future.”