Every day brings more news of major businesses in trouble due to the coronavirus lockdown. Airlines have been particularly hard hit, for example, with Virgin Atlantic cutting 3,000 jobs and closing their Gatwick operation, while British Airways are also considering pulling out of Gatwick.
The problems aren’t confined to big business, though. Depending on the sector, many SMEs have also been badly hit.
The Challenges Facing SMEs in the Lockdown
The vast majority of businesses in the UK are SMEs, with far fewer reserves to draw on than the giants, and the picture here is alarming. Even with the support measures announced by the government, it’s estimated that a third of all SMEs will be unable to cover their costs by the end of July unless they’re able to reopen.
This isn’t just a threat to the individual SMEs, but to the whole economy. For example, Dr Liz Cameron, chief executive of the Scottish Chambers of Commerce, suggests that “If we are to prevent the Scottish economy from being damaged beyond recognition, businesses need cash in the bank now to be fit for when the country is able to start returning to day to day activities.”
Cashflow Is the Problem
The situation in England is much the same, and the big problem is often increased difficulty in getting payment from clients, who may themselves be experiencing a similar situation with their own clients. There can be a domino effect, leaving many SMEs critically short of cash.
According to David Postings, chief executive of Bibby Financial Services, “While government measures have bought many SMEs time, it is hard to overstate the scale of the cashflow challenge they face. Even recently thriving cash-rich SMEs are finding reserves running dry as invoices are taking longer to get paid or are written off entirely.”
Cautiously Hopeful Signs
The Prime Minister’s announcement this week offers some cautious hope that the lockdown may be ending, but there’s still a way to go. A lot of questions are left open, as far as individual businesses are concerned, in particular whether they’re able to operate on a social distancing basis. Some small businesses may not be out of the woods yet.
Government furlough schemes and loans, such as the Bounce Back Loans for small businesses that have gone live this month, should help in the short term. If your business is suffering cashflow problems through unpaid invoices, though, there’s no substitute for being paid what you’re owed. Why not give me a call to see if I can help with that?