Millions of firms face cash-flow crisis as coronavirus lockdown bites

Most firms only have up to three months’ cash in reserve and cannot wait much longer for Government help if they are to survive the coronavirus lockdown, a new study suggests.

Research by the British Chambers of Commerce (BCC) indicated that almost one in five firms have less than a month’s worth of cash and 44% have only three months’ worth.

The survey, which questioned around 600 business, found that almost half expect to take advantage of the Government’s coronavirus job retention scheme, which covers 80% of the wages of furloughed workers.

A third of those polled said they were planning to furlough between three-quarters and all their staff in the next week, while one in four said they would not use the scheme.

Two out of three firms said they were embracing remote working, with half using video conferencing. But almost a fifth of those surveyed said they had closed their business temporarily.

BCC director general Dr Adam Marshall said: “The coronavirus pandemic has taken a heavy toll on business and economic activity across the UK.

Dr Adam Marshall, director-general of the British Chambers of Commerce
(Image: Coventry Telegraph)

“While businesses have welcomed the unprecedented size and scope of the Government support packages, our findings highlight the urgent need for that support to reach businesses on the ground as soon as possible.

“The majority of firms cannot wait weeks or months for help to arrive.

“There’s no escaping the scale of the challenge UK businesses are facing, yet many are already finding ways to contribute to the national effort to tackle coronavirus.

“Chambers and their members are working together to play their part, including gathering unused PPE equipment from local businesses and delivering them to the NHS.”

The Chambers’ findings have been backed by a separate study which suggests that nearly a million small firms could run out of cash within the next four weeks as they struggle to access the Government’s widely criticised emergency coronavirus loans support.

A report by The Corporate Finance Network of accountants predicts that almost a fifth – 18% – of Britain’s five million small businesses will not be able to survive the next month despite the taxpayer-backed loan scheme.

This could see nearly four million staff lose their jobs in May, it cautioned, adding that as many as 42% of small firms could go bust if the lockdown lasts for four months or more.

The findings have heaped more pressure on Chancellor Rishi Sunak to overhaul his taxpayer-backed emergency loans scheme for hard-hit businesses amid fears it is failing to offer the support needed.

The Treasury insisted on Wednesday that “hundreds” of loans had already been issued through the scheme.

The Business, Energy and Industrial Strategy Committee cautioned earlier this week that problems with the scheme were putting off many firms from accessing the cash.

Rachel Reeves, chairwoman of the cross-party committee of MPs, has written to Mr Sunak outlining concerns over the way lenders are “interpreting” the emergency loan scheme and calling for him to clarify the terms and conditions.

Swathes of small firms have been complaining the scheme is hard to access and that it is not a level playing field, with banks being given too much leeway.

The Corporate Finance Network – which works with nearly 13,000 businesses – believes as many as 250,000 small businesses will need to join forces and merge to survive and protect jobs.

Kirsty McGregor, founder of The Corporate Finance Network, said: “To save a significant percentage of the UK’s economy and keep almost four million people in jobs, we need to encourage and facilitate 250,000 deals within the next few weeks.

“We can absolutely do this by incentivising them, supporting them, and with the full backing and incentive of the UK government.”

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