Almost 70% of the UK’s smallest businesses expect to lose more than half of their annual turnover due to the coronavirus crisis, according to research conducted by Sheffield University Management School (SUMS), in association with Small Business Britain.
Over 1,500 microbusiness owners were surveyed to assess the resilience of the UK’s most vulnerable firms, many of which feel they have been overlooked amid the Covid-19 pandemic.
They found that 67% of microbusiness owners are now lacking confidence about their prospects going forward, believed to be some of the worst figures on record. More than three quarters (78%) said cash flow was their biggest problem, followed by a drop in customer demand and difficulty accessing finance. The overwhelming majority (93%) do not have any insurance to cover the losses caused by the Covid-19 pandemic.
Despite these challenges, more than half have not sought any business advice to help them through the crisis, but they highlighted that marketing and sales, business resilience and financial planning are areas where they need help.
Microbusinesses are responding to the pandemic in different ways. The biggest challenge is engaging and supporting microbusiness owner-managers, particularly in customer-facing businesses, who do not feel able to respond to the crisis, or who have suspended or stopped operations.
The academic researchers at the University have called on the government to prioritise support for these firms, allocating resources according to the greatest levels of need.
However, some micro businesses have been able to change their business models by shifting their operations online. One in three are looking to sustain their businesses by going online, while around a quarter are offering new products or services and tapping into emergency funding.
The research shows that micro businesses feel positive about the government’s business support package, but are uncertain about local delivery and how quickly they will receive financial aid, with many fearing they will collapse before support reaches them. Awareness and eligibility are also key issues. Many micro businesses are uncertain about whether they qualify for a small business grant and they are not accessing business support. Uncertainty over when the support is going to be received blocks any attempt to plan for continued operations.
Professor Tim Vorley, Chair in Entrepreneurship at the University of Sheffield, who led the study, said: “Much of the government’s focus so far has been on SMEs and larger companies, but micro businesses represent a significant proportion of our economy, and are especially vulnerable to this unprecedented socio-economic shock.”
Dr Cristian Gherhes, a Research Associate at the University of Sheffield, said: “Our research is revealing that confidence among the UK’s smallest businesses is at rock-bottom, with most expecting to see more than half of their gross income wiped out by the coronavirus crisis. Most of these businesses don’t want to give in to the pressure of the pandemic. But they urgently need further support and clarity over when funds are going to be made available if they are to survive the crisis.”
The University of Sheffield team is conducting the ongoing study in collaboration with Small Business Britain, which is working closely with ministers from the Department for Business, Energy and Industrial Strategy to help inform the government’s response to the pandemic. The research team undertaking this study includes Professor Tim Vorley, Dr Cristian Gherhes, Dr Carlo Cordasco and Dr Chay Brooks.