COVID-19 Image by Gerd Altmann from PixabayResearch by Sage and QuickBooks has shed a gloomy light on the prospects of SMEs in the UK. Both software vendors continue to carry out polls across the UK to determine the state of businesses as some are able to emerge from lockdown.

The QuickBooks Small Business Sentiment Tracker was based on two polls of about 500 SMB decision-makers in April and May. The Sage SMB Tracker completed its third monthly poll of 500 SMB decision-makers in late May.

Confidence is growing but not everywhere

According to QuickBooks confidence is growing. 57% feel confident about business confidence after the lockdown eases from June 15th, up from 46% last months. This still leaves 43% not confident though!

When asked “How well placed would you describe your business in terms of its ability to continue operating over the next month?” confidence seemed lower. Hospitality and Retail, which Sage also called out as in the doldrums, showed a small increase in sentiment to 30%.

Surprisingly, Manufacturing was also a low 33%. One might assume this indicates that solving social distancing on the factory floor is not easy. However the Sage research (qv) showed that this is probably not the case. More businesses are closing as well, if temporarily. More than half (51%) of hospitality have stopped operations, an increase from 37% in May.

Chris Evans, Vice President and Country Manager for UK, QuickBooks (Image credit Linkedin)
Chris Evans, Vice President and Country Manager for UK, QuickBooks

Chris Evans, Vice President and UK Country Manager at Intuit QuickBooks commented: “Small businesses have been disproportionately impacted by COVID-19, with many having to close or cut back on activity. The likes of cash flow, late payments, confidence and the burden of admin have all taken their toll, but we are now finally starting to see some light at the end of the tunnel. Many SMEs will be starting to turn their attention to recovery and readiness to reopen their doors.”

How much will this hurt?

Sage looked closer at the financial impact with hospitality expecting a 75% hit to annual revenues as the shutdown continues during for many organisations, their busiest months. Retail has likewise lost 32% of its revenues. There is a silver lining for some industries with technology, media and healthcare businesses estimating a net increase.

Most companies do not see a significant increase in revenues until after July. 61% of organisations are now operating at a loss. For those where the summer months provide their biggest profits, will they recover? Nearly a third (32%) of business will make less than half of their normal revenue by July.

Is the government doing enough

With many small businesses suffering, they continue to look to the government for support. Is it doing enough? This is not just about financial support, although more businesses are taking advantage of various schemes. Some (19%) want an extension to the Self-Employment Income Support Scheme.

These questions about returning to work safely were also highlighted by Sage. Only 39% of hospitality businesses felt they could keep workers safe. At the other end of the scale, 74% of manufacturers believe they can.

Hospitality faces the toughest prospect. Not only are social distancing requirements likely to significantly reduce footfall but the high degree of contact required carries greater risks. Restaurants and Pubs will suffer most until social distancing ends. That still seems a distant prospect. Until that happens small cafes, pubs and restaurants that rely on densely packed tables will potentially lose 80% of covers, making the business unviable in many cases.

Sabby Gill, Managing Director of UK&I at Sage noted: “There is also a significant and growing divide between the sectors as the crisis continues.  As the retail and hospitality industries remain at a standstill, the financial fortunes of these businesses are diverging even further from those of the average SMB. They will also face a whole different set of operational challenges. Meanwhile, some businesses – particularly in technology and healthcare – are projecting growth in sales and making plans to grow their teams.

 “This underlines the need for a tailored, more sector-focused approach to support as we move into the next phase. We must ensure small businesses in critically challenged sectors do not get left behind.”

Two insights, one surprising

Sage discovered two insights about the situation. The first was that technology is helping many businesses emerge from COVID-19. Key statistics included:

  • 28% have begun conducting business online in direct response to the pandemic
  • 41% using video conferencing or consultation to resume operations
  • 36% using online retail
  • 26% using apps.

This shows that entrepreneurs running small businesses are not giving up hope but turning to alternative routes to market. Many of them are turning to technology to do so. In some cases, they may become a reinvented businesses. Especially retailers who manage to increase sales through online sites.

Sage also surveyed whether firms will continue to focus on reducing their environmental impact. 67% indicate that they plan to maintain or increase their environmental sustainability efforts after the COVID-19 pandemic. It is welcome news that this is such a positive number. Perhaps it is in part due to the impact lower pollution levels are having and the benefits of cleaner air that more people are enjoying. Most notable, perhaps, is the lack of air traffic similar to the impact of Eyjafjallajökull erupting in 2010.

Enterprise Times: What does this mean?

Sabby Gill, Executive Vice President and Managing Director of UK and Ireland

Gill also noted: “We are starting to see some green shoots of recovery as the SMB community begins to return furloughed workers and the average financial impact continues to reduce; with technology and eCommerce proving a key enabler.

“However, we must treat this with caution. The outlook remains deeply concerning as we look towards Q3 and the relaxing of lockdown, with financial challenges continuing to bite for many.”

The dark cloud is that 65% of businesses are now preparing for a ‘second spike’ of COVID-19 according to Sage. If that happens after lockdown eases, and businesses are forced to shut once again it could mean some dark days ahead.

The greatest casualty is probably the hospitality industry. There are other high contact industries such as hairdressing and some healthcare practises such as osteopaths. Some of the latter remain open but only for remote diagnostics as per recent guidance by the Institute of Osteopathy.

While both vendors see light at the end of the tunnel, the journey is not yet complete. Technology is certainly one way in which organisations can emerge from the pandemic, if not stronger then with the basis of a solid business in the future. As Gill notes the government needs to consider a more nuanced approach with some industries looking to suffer more in the coming months.


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