Published: 10 February 2021
ERC Insight paper. February 2021
We know the economic consequences of the COVID-19 pandemic were severe for the UK in 2020, but what was the outcome for small- and medium-sized businesses?
A survey of over 1,000 UK SMEs carried out in the Autumn of 2020 provides some insights into the impact of the pandemic on key business metrics. In addition, it considers the response of SMEs in terms of strategy reprioritisation and adoption of new digital technologies.
While COVID-19 has been a major determinant of recent economic trends and the dominant challenge for most SMEs, the survey identifies other obstacles to business success, which are likely to influence the future outlook for the UK’s SME sector.
How will Covid-19 affect business dynamism in the UK? Although, this question is yet to be answered, this paper aims to provide an early assessment by comparing company incorporations and dissolutions in the first quarter of 2020 with the same period in 2019 using the latest available data from the FAME dataset. We observe a drop in incorporations and an increase in dissolutions. The analysis shows that there has been a 70% increase in the number of company dissolutions in March 2020 compared to March 2019. In absolute terms, London had the biggest increase with over 6,400 more dissolutions. In relative terms, this sharp increase was particularly striking in the West Midlands and Wales both of which experienced more than a 100% increase in dissolutions. The sectors particularly influenced by this trend are Wholesale & Retail, Professional Services, Transportation & Storage, Information & Communication and Construction. One important point is that the increase in company dissolutions is driven by young firms which appear as the most vulnerable when facing uncertainty and the current unprecedented challenges.
The UK Government has unveiled a substantive package of support for UK firms, but at the time of writing many firms are struggling to access this assistance and there are some obvious gaps in the range of initiatives announced. If those shortcomings are not remedied quickly, it is foreseeable that we will continue to see a long, slow decline in the number of private-sector firms that support millions of jobs across the economy. In that context, rather than seeing a V-shaped downturn and rebound as some economists such as the OBR have predicted, we could instead see an L-shape recession dragged down by a net loss of companies over a long period.
Published: 19 April 2020
Covid19: Critique and Proposals to Develop More Comprehensive and Inclusive Support for the SelfEmployed
The UK Chancellor Rishi Sunak has promised the self-employed they are ‘not forgotten’ and claimed that his headline programme – the Self-Employment Income Support Scheme (SEISS) – will protect 95% of those for whom self-employment is a main job. However, the policy excludes start-ups and, in an initial critique, we called for businesses without a 201819 Self-Assessment record (new businesses or those that did not become profitable until after April 6 2019) to have a chance to do their 2019-20 assessment early from April 6th 2020 for one month. This would then make them eligible for an SEISS payment in June 2020.
We also analysed Covid19 support for the self-employed in Germany and Denmark and found more comprehensive packages, supporting business costs and not just selfemployed income.
Following further discussion and analysis, this document outlines in detail the support for income losses and business losses or cash flow problems available to four categories of self-employed worker under UK Covid19 policy: the established self-employed for whom self-employment is a main job; the new(ish) self-employed for whom self-employment is a main job; the self-employed as a second job, and; the established self-employed who grew their businesses so self-employment became their main job in 2019-20. See Tables 1-4 below. We estimate that nearly I in 5 of the self-employed – over 750,000 people - are excluded from the SEISS and that many of the unprotected will have low or no social protection under Universal Credit and the Employment and Support Allowance. This means that some have no pay during periods of Covid19 sickness and self-isolation, a situation that could undermine the social distancing strategy. Home-based businesses without premises have no access to grant support with business losses and, we argue, are likely to be reluctant to apply for the Business Interruption Loan Scheme or, indeed, to be eligible for this fund.
Published: 2 April 2020
Enterprise Research Centre
Warwick Business School
University of Warwick
Coventry CV4 7AL
Enterprise Research Centre
Aston Business School
Birmingham B4 7ET
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