Wednesday 19 August 2020 8:02 am

BCC: UK businesses face tough outlook after furlough ends

More than one in three UK businesses have emerged from a bruising lockdown with less than three months’ worth of cash reserves, according to a British business body that warned firms remain “in the eye of the storm”.

A survey conducted by the British Chambers of Commerce (BCC) found that business conditions have only slightly improved in the months following the UK’s historic second quarter slump in GDP.

The economy shrank 20.4 per cent between April and June to push the UK into its worst recession on record.

Since then, 38 per cent of UK businesses have reported a rise in revenue, according to the survey conducted in early August. That figure is better than last month’s 34 per cent and a record low three per cent during lockdown.

But the BCC’s survey of 502 British firms warned more companies are still reporting a decline in turnover.

And half of UK businesses are still depleting their cash reserves, more than double the 22 per cent that have seen an increase.

Government support schemes were central drivers of UK firms’ ability to bolster their cashflow.

The job retention scheme, where furloughed workers’ wages are paid by the government, was cited by 34 per cent of companies that improved their reserves. And the various coronavirus loans schemes helped 30 per cent of firms that managed to build up cash. 

More than two-thirds (68 per cent) cited customer demand as another factor.

However, the BCC warned that UK businesses face doubts over their futures after furlough ends in October, with other support schemes winding down.

“While some firms are seeing improvements in trading conditions, we are still very much in the eye of the storm, with further turbulence ahead,” BCC director general Adam Marshall said. 

“As the government’s emergency measures begin to wind down over the coming weeks, and with the prospect of further local lockdowns still very real, businesses across the UK are going to need further support to weather uncertainty over the coming months. 

“Slashing the jobs tax by taking steps to reduce the burden of employers’ National Insurance contributions, big new incentives for business investment, and targeted support to help businesses placed under local lockdowns all need to be put in place now. Ministers must not wait until the economic storm is once again at fever pitch before they act.”

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