A fifth of small firms expect performance to be ‘much worse’ over the next three months. But, one in ten expect the opposite according to new data from the Federation of Small Businesses, which surveyed 1,486 small businesses for the Q2 2020 Small Business Index at the end of June 2020.
More than half (58%) of firms surveyed expect their performance to remain stable or worsen over the next three months. Four in ten (42%) expect a relative improvement as lockdown restrictions lift. Three quarters (75%) say that coronavirus is still having a negative impact on their confidence levels. The figure stood closer to nine in 10 (88%) in Q1.
Those in the construction and accommodation and food service sectors are among the most confident about a relative uplift in performance next quarter, with 29% and 26% expecting a significant improvement respectively. Among the least confident are those in the wholesale and retail and arts and entertainment sectors, where only 13% and 2% think likewise.
FSB National Chairman Mike Cherry said: “The majority of small business owners have benefitted from the Government’s emergency support measures but many have not. We urgently need to see the Treasury outline how it intends to support those who have been left out, not least company directors and the newly self-employed. Additional help for those who are being forced to stay closed while others re-open is also a must. We have to avoid a scenario where those who’ve received support are able to navigate choppy economic waters over the months ahead while others are left to sink.”
The share of small firms that have reduced headcounts over the last three months is at an all-time high (23%), while the share doing the opposite is at an all-time low (4%).
More than 16m people currently work for smaller businesses, equating to 60% of the private sector workforce, according to BEIS.
A record-high three quarters (75%) of smaller businesses report that profits fell in Q2 of this year. The vast majority (82%) say they are operating below capacity.
Cherry added: “There was a lot to welcome in the Chancellor’s summer statement where efforts to increase job creation and retention are concerned. That said, given so many small firms are already being forced to reduce headcounts, policymakers will need to keep existing interventions under close and continuous review to ensure they are sufficient. They should also be conscious that tax increases for small businesses and the self-employed would risk stifling any nascent recovery.
“Government at all levels should do more to help small firms putting protective measures in place. In England, they’ve had to absorb the costs of making their premises safe for re-opening. Enabling them to reclaim expenses linked to these measures and access face coverings easily will help to keep our high streets safe.
“Where local lockdowns are required, it’s important that affected firms are not left stranded without support. New local authority powers should be exercised sensibly and councils should have the freedom to draw on funds to support small firms wherever required.”
The new study shows a surge in small business finance applications - one in three (34%) respondents have sought new facilities over the past three months, up 20 percentage points on the same period last year.
The success rate for applications has hit an all-time high (81%), as has the proportion offered borrowing rates of under 4% (85%).
“The BBLS has been a clear success, facilitating more than one million loans to small firms in need. Those businesses now need reassurances about the future as they look to realise their full potential,” said Cherry. “A guarantee that they won’t have to start making repayments until they’re turning a profit would give them the confidence to invest and hire today, rather than further down the line when such activity may prove too little too late.”