New business report calls on Government to help SMEs

New analysis released by Xero has revealed that small business revenue between March and May dropped by 28%, and employment dropped by 6%. Late payments to UK small businesses increased by 7.8 days to 38.5 days late on average between February and May. The new findings underpin Xero’s ‘Roadmap to Recovery’ calling for extra government support to help SMEs rebuild.

Based on anonymised and aggregated data from Xero customers in the UK, its Small Business Insights (SBI) reveals a significant downturn in revenues and jobs during the period and examines the data across industries and regions. Although the impact of Covid-19 has been felt across the country, the data showed that small businesses in the East Midlands suffered from the most job losses, with a 3.7% fall in April and 8.5% fall in May. Comparatively, small businesses in the South of England saw a 6.3% fall in job losses in April, and a 0.1% fall in May. Xero Small Business Insights research team found that revenue for small businesses was 28% lower in May and 26% lower in April, when compared with the previous year. Analysis of customer data showed that the hospitality sector (57% revenue fall in April, and a slight improvement to 54% revenue fall in May) and the arts and recreation industries (41% fall for both April and May) were hit the hardest. Meanwhile, the construction (45% fall in April, with an improvement to 31% fall in May) and manufacturing industries (28% fall in April, compared with 18% fall in May) both saw smaller declines in May, potentially pointing to some signs of recovery. The data found that invoices are taking longer to be paid, with the average time for small businesses to be paid increasing sharply by 7.8 days since February (from 30.7 days to 38.5 days). With late payments already a point of concern for small businesses, longer payment times are likely to compound the cashflow stress. Xero has identified the key areas of government support needed by small businesses in order to rebuild. Its ‘Roadmap to Recovery’ provides recommendations, covering technology access, digital skills development and strengthened local communities, and calls for 30 days payment terms as standard, digital tools tax relief, improved regional internet access and an offset of technology expenses against tax.