Tuesday 23 February 2021 1:37 pm

Exclusive: Small business owners on what is happening in the real economy

The City was hit with some sobering figures earlier this month, as official data showed UK GDP shrank by a staggering 9.9 per cent in 2020, the largest drop on record.

The figures were less bad than expected, which led PwC to conclude that British businesses are becoming more adaptable to lockdowns from an economic perspective.

Is this the case? City A.M. spoke to a number of small business owners to provide an insight into what’s happening in the real economy.

“The pandemic has been financially catastrophic for the travel industry,” sighed Jess Brooks, founder of travel and tourism agency Eternal Landscapes.

The small specialist tour operator, which has no stakeholders or investors, has now been a full year without any income.

“Our savings pot is empty. The uncertainty is emotionally tough and we cannot make plans as we have no way of knowing when and to what extent our business will return,” Brooks told City A.M.

Read more: UK nightlife ‘faces extinction’ without government support

It’s not any different in the entertainment and arts space, currently.

“Like so many businesses in the entertainment and arts sector, we’ve had absolutely no work for virtually a year now and have received very little support from the government,” said Paul Asbridge, founder of entertainment company Jam Hot.

Small businesses have been left in financial ruin due to the pandemic, with one in 12 unsure they will ultimately survive, according to recent data from Santander, which also found that 21 per cent of small businesses expect they may collapse before any changes in restrictions kick in.

“I still can’t believe the ignorance of the Chancellor in relation to small business limited company directors, and of course the entire arts sector. We are legitimate tax payers and have been blatantly ignored,” Asbridge shared with City A.M.

Rollercoaster

The Office for National Statistics warned the latest UK GDP figures may be less accurate than usual due to the massive change in the economy this year.

Sarah Palmer-Granville, founder of interior design business SPG Interior Design, recognises that statement as she called the last 12 months “a total rollercoaster.”

“We have had some very lean months, but at the same time some opportunities have arisen because of the pandemic,” she said, adding that, as a fledgling business, Palmer-Granville did not receive any governmental support.

Many small businesses were in a similar situation. According to a recent report from software provider Sage, half of SMEs have taken out some form of Covid-19 related loan, leaving an average additional debt burden of £173K per year once repayment begins, with only 63 per cent confident in their ability to repay.

The survey also found that half of SMEs that were profitable before the pandemic are not currently profitable. As a result, a fifth of SMEs have made redundancies to date.

Read more: Pandemic set to land SMEs ‘extra £173,000 debt’ each year

Matthew Fleming-Duffy, director of mortgage broker Cherry Mortgage & Finance, told City A.M. he has had his worst, as well as his best-ever month last year.

”2020 will certainly go down as one of the most disruptive, unpredictable years in history,” he said.

So far this year, particularly due to the stamp duty holiday, his business has continued to receive high levels of mortgage enquiries but many cases are being delayed due to slow operations at banks and building societies, Fleming-Duffy added.

His observations are supported by recent data from payment specialist Marqeta, which found that many small businesses have lost confidence in Britain’s biggest banks and are increasingly tempted to move across to digital challengers. 84 per cent of those surveyed said they were frustrated with their current banking experience

High street lenders have come under fire for their treatment of SME customers during the pandemic after City A.M. revealed multiple applications had been declined despite firms being eligible for funding. 

Read more: ‘All over by June’ under Boris Johnson’s roadmap for leaving lockdown

Looking ahead

The economy may have shrunk by nearly a tenth, it did narrowly avoid a double-dip recession with growth of one per cent in the final quarter of the year.

Moreover, the government’s roadmap out of the third national lockdown, as well as the UK’s ambitious vaccine rollout, do give small businesses some hope. The ambitious vaccination program paints a positive picture for future growth, as the Bank of England stressed last week.

“We’re quietly confident for prospects later in 2021 and beyond as the nature of the office and working patterns continue to change and the design of the workplace needs to evolve as a result,” Palmer-Granville said.

Over the weekend, it was reported that over 17m Brits had received a first dose of a Covid-19 vaccine, accounting for over 20 per cent of the entire population.

Moreover, Rishi Sunak is set to extend business rates relief and the furlough scheme into the summer, offering further support to companies battered by coronavirus restrictions.

“Times have been incredibly tough but with the mass vaccination roll-out, there may, just may, be cause for hope,” Asbridge concluded.

Read more: All UK adults to be offered Covid vaccine by 31 July

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