London, Scottish and North East-based SMEs will be the worst affected by coronavirus, according to new research by small business insurer Simply Business.
The SME Confidence Report spoke to 3,700 SME owners across the UK to measure the impact of coronavirus on small businesses and found that in London the pandemic will cost SMEs £17,074 each on average in lost work, earnings and loan repayments. That’s £6,000 higher than SMEs based in the South West, and over £5,000 higher than the national average (£11,779).
In Scotland, whose private sector recorded one of the deepest slumps in business activity in the UK last month, SMEs will be facing an average cost of £15,484 each caused by the coronavirus. SMEs in the North East, meanwhile, will be facing the third highest average cost of £15,040 each.
Across the whole of the UK, the total cost of coronavirus to SMEs will exceed £69 billion.
The figures come as The Organisation for Economic Co-operation and Development warned the UK is likely to be the hardest-hit by Covid-19 among major world economies, with the UK economy likely to fall by 11.5% in 2020.
ONS figures released on Friday also showed the UK economy dropped a record 20.4% in April, far exceeding the downturn during the 2008-09 financial crisis.
Average cost of coronavirus per small business, including lost work, earnings and loan repayments:
- London – £17,074.36
- Scotland – £15,483.65
- North East England – £15,039.52
- South East England – £12,753.44
- Wales – £11,804.82
- North West England – £11,494.86
- The Midlands – £11,079.12
- South West England – £10,989.60
Business confidence is at its lowest in Scotland and the North West, where well over two fifths (45%) say their business is at risk of closure.
Across the UK, an estimated 234,000 SMEs have already shut down, while two thirds (67%) have temporarily ceased trading.
The largest number of permanent closures has been seen in London, with 7% of SME owners saying they have ceased trading, compared to the 4% average across the rest of the country. This equates to approximately 76,300 SMEs permanently shut down in London alone.
The South East and South West have the lowest risk of closures, with 38% of SMEs saying their business is at risk of closing.
Room for optimism
SMEs are vital to the UK’s economic prospects, and so despite the damming figures, it’s encouraging to see signs of stoic resilience across the SME community.
Across the country, three quarters (75%) of SMEs plan to continue, or restart, their current business, while 10% are even confident they’ll start a new business.
As the economy emerges from the crisis, London is set to remain a key hub for SME activity.
Despite the capital facing the greatest cost, Simply Business also expect to see the highest number of new start-ups emerge from the capital, with 15% of SME owners planning to start a new business after Covid-19, compared to the 8-9% average across the country.
This could potentially see up to 163,500 new SMEs start up in London alone after coronavirus, helping to negate some of the effects of those lost.
Across all regions, around a fifth (22%) report feeling optimistic about life after coronavirus.
The study also looked into how well supported small businesses feel by the government.
A fifth (42%) of small business owners in Wales said they don’t feel supported by government – the highest of any region. This is closely followed by London and Scotland (both 40%), and the North West (39%).
However, over half (56%) of SMEs across the UK said they’ve been able to successfully apply for a government loan or grant, and just under half (47%) mentioned it was easy to find.
Alan Thomas, UK CEO at Simply Business, commented: “Covid-19 has had a significant impact on SMEs and small business owners up and down the country – with many being forced to sadly close.
“Their importance to the UK can’t be overstated – accounting for 99% of all British businesses and contributing over £2 trillion in combined turnover. Put simply, it’s essential for our economy that small business bounces back.
“But they’re also crucial to our communities, and we’ve all been eager to see more small businesses have the opportunity to restart their trading – knowing many are relieved to have opened up their doors this week. However, with social distancing measures and strict government guidelines still in place, the challenge is far from over for most.
“No corner of the UK has been able to escape the effects of coronavirus, and the financial impact across the country is startling. SMEs in the capital will be swallowing a cost of over £17,000 each – around £5,000 higher than the national average.
“While the financial impact of Covid on small business owners is enormous, we’re incredibly inspired by their resilience and equally encouraged by their optimism.
“With so many set to continue or restart their current business, and many others planning to open new small businesses, we expect confidence to continue to rise as we move through the stages of lockdown.”
With financial support vital to keeping small businesses going, Simply Business has launched a free Financial Support Checker to help SMEs, landlords and the self-employed to quickly determine what financial support and schemes are available to them during the coronavirus pandemic.
A simple questionnaire takes business owners just a few minutes to complete and will point them towards relevant financial support.