Thursday 2 April 2020 9:29 am

BCC: UK businesses face cash flow crisis in coronavirus fallout

Most of Britain’s small businesses have just three months or less of cash reserves as they bid to survive the UK coronavirus outbreak, according to a study released today.

And firms have already experienced a “sharp and significant” fall in domestic and overseas revenue amid a global coronavirus lockdown.

The British Chambers of Commerce (BCC), which released the first Covid-19 Business Impact Tracker study today, warned small businesses cannot wait months, or even weeks, for support.

Businesses ‘could fold in weeks’ over coronavirus

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

“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

“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.”

A third of the 600 firms surveyed were set to furlough at least 75 per cent of their workforces.

That will see the government pay 80 per cent of employee salaries to avoid businesses making staff redundant over coronavirus.

But it warned the greatest challenge was cash flow. The alert comes after businesses criticised banks over their payment of £330bn in coronavirus support loans.

Almost one in five British firms warned they have less than a month of cash in reserve.

And 44 per cent said they have only up to three months’ worth of cash.

The Corporate Finance Network yesterday warned 20 per cent of British businesses could collapse in the next month. It directly blamed banks’ handling of coronavirus support payments.

That would put 4m jobs at risk as businesses contend with the coronavirus outbreak.

Any UK small business with a £45m annual turnover can seek a government-guaranteed loan of up to £5m.

Banks slammed over coronavirus loans

But the Federation of Small Businesses (FSB) yesterday complained banks have rejected applications and pushed firms towards ordinary loans.

And business select committee chair Rachel Reeves told chancellor Rishi Sunak that the way banks are interpreting the loans scheme is discouraging access.

“Banks need to be more proactive in… streamlining applications so that SMEs can access funds quickly,” she said.

Sunak is now reportedly set to overhaul the loans scheme after talks with lenders.

Sky News reported the reformed scheme would offer loans as interest-free and charge-free for the first year. But companies must prove their businesses are viable and they can pay back the loan.