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One in four UK small businesses hit by cash crisis

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Saleha Riaz
·2-min read
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Businesses within the insurance and pensions sector (46%) and charity and voluntary sector (42%) are the most fearful of late payments, according to a survey. Photo: Getty Images
Businesses within the insurance and pensions sector (46%) and charity and voluntary sector (42%) are the most fearful of late payments, according to a survey. Photo: Getty Images

More than a quarter (26%) of UK small businesses have said poor cashflow is their biggest financial concern amid the economic fallout of the pandemic, a new report revealed.

The Business Challenges report, carried out by card payments company Takepayments limited, found that these businesses are constantly chasing late payments during the pandemic.

“It is concerning that one in four business owners are finding themselves constantly chasing up late payments. It’s not only time consuming for them but it also has a worrying impact on them," said Sandra Rowley at Takepayments.

Businesses within the insurance and pensions sector (46%) and charity and voluntary sector (42%) are the most fearful of late payments, with nearly half expecting to chase late payment of invoices throughout the year (46% and 42% respectively).

The report also said there is widespread concern on the impact Brexit will have on cashflow, with 21% of small business owners worried about this.

Watch: What UK government COVID-19 support is available?

READ MORE: One in three business-to-consumer firms face cash crisis

More than one in 10 (15%) businesses say financial challenges will be their biggest concern for the year ahead thanks to the economic crisis caused by the pandemic, and subsequent UK lockdowns.

Almost half (49%) of small businesses anticipate their business to make a loss or close in the year ahead.

Businesses within the performing arts (33%), healthcare (32%), creative arts and design (26%), and hospitality and events management (26%) industries are those most expecting to make a loss this year.

The report also revealed potential financial skills gaps in small businesses, with almost one fifth (18%) of business owners and senior decision-makers describing their knowledge of invoicing as ‘limited’ and 19% stating they were not confident using online banking for their business.

Despite the government extending the furlough scheme to help reduce the number of unemployment in the UK and ease the financial strain on businesses owners, three in ten (30%) admit they have made job cuts.

A report from earlier this month found that record levels of smaller businesses sought external financial support in 2020.

The study said gross bank lending to SMEs, excluding overdrafts, was up 82% to £104bn ($144bn), driven by use of government loan schemes, with significant further demand for such loans expected in 2021.

And a survey of 1,100 businesses recently showed that just over one quarter (28%) of firms overall and only one-fifth (20%) of B2C firms have cash for more than 12 months.

Watch: What is a budget deficit and why does it matter?