Monday 11 January 2021 6:00 am

250,000 UK small businesses may fail in 2021 unless they get help to survive lockdown

With the new year starting in lockdown, at least 250,000 UK small businesses could fail in 2021 without further help, a new study warns.

The Small Business Index (SBI) from the Federation of Small Businesses (FSB) shows confidence is at its second lowest ebb in the report’s ten-year history.

The London Small Business Index stands at 11 points below the UK average.

One in five firms nationally have cut staff in the three months to December, and one in seven are expected to do the same before April.

Read more: Close to 4,000 UK financial firms ‘at risk of collapse’ after first Covid-19 lockdown

The Department for Business, Energy and Industrial Strategy (BEIS) estimates that 16.8 million people work in smaller firms across the UK.   

There are 5.9 million small firms across the UK.

The vast majority of those surveyed do not expect their performance to improve over the next three months.

Although only five per cent of the 1,400 firms surveyed said they expect to close this year, this does not reflect the threat of closure faced by businesses hoping to survive despite having frozen their operations, reduced their headcounts or taken significant debt.

On a national level, this will put the UK on course to lose more than a quarter of a million businesses.

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

Read more: Rishi Sunak rolls out more financial support after sinking businesses demand an immediate lifeline.

FSB London chair Rowena Howie said: “We need to adequately support businesses who are feeling the big pinch, particularly those in Central London boroughs who missed out on a fair proportion of local discretionary grants and who have seen a massive footfall reduction, and those who rely on a thriving London night-time economy.

“The fear of at least 50,000 London businesses folding in the Capital, based on this fresh FSB data, is extremely worrying.”

FSB national chairman Mike Cherry said: “The development of business support measures has not kept pace with intensifying restrictions.

“At the outset of the first national lockdown, the UK government was bold. The support mechanisms put in place weren’t perfect, but they were an exceptionally good starting point. That’s why it’s so disappointing that it’s met this second lockdown with a whimper.

“All the while our exporters are trying to get across what a new EU-UK trade agreement means for them without the cash they need to make adjustments.

“Direct funding to help them manage new obligations in the form of transaction vouchers is urgently needed.”