A third of UK SMEs to run out of cash by July, despite Government support

BFS study reveals scale of coronavirus lockdown impact on UK SMEs

  • More than three-quarters (77%) of SMEs say orders have declined since the outbreak
  • A quarter of SMEs write off an average bad debt of £34,500
  • Government measures prompt 24% of SMEs to delay lay offs

A third of UK SMEs will be unable to cover their costs by the end of July despite an unprecedented £330bn package of loans and guarantees from the Government, according to the latest research from Bibby Financial Services (BFS). The new study of SMEs shows this number rising to more than half should the lockdown continue into the third quarter.

UK SMEs are taking action to improve their cashflow with two-fifths (39%) pausing their operations entirely to minimise costs and a further 38 per cent closing parts of their operations.

However, while government funds are beginning to land in bank accounts, SMEs are already footing the bill for a growing number of unpaid invoices. A quarter of SMEs have written off an average of £35k in bad debt since the beginning of February.

Even businesses without bad debt are facing significant cashflow problems, with the impact of Covid-19 trickling through the supply chain to SMEs. More than three-quarters (77%) have seen orders decline since the outbreak began, and almost a fifth (17%) have been forced to renegotiate contracts with customers and suppliers.

David Postings, Chief Executive of Bibby Financial Services, commented:

“The Government is taking proactive measures at pace, and it is reassuring to see the Chancellor acting to support small and large businesses alike.

“While Government measures have bought many SMEs time, it is hard to overstate the scale of the cashflow challenge they face. Even recently thriving, cash-rich SMEs are finding reserves running dry as invoices are taking longer to get paid or are written off entirely.

“SMEs will play a crucial role in the economic recovery to come, and large businesses must do all they can to safeguard not just their own cashflow but the viability of their whole supply chain.”

Government measures are having a positive impact however, and have already saved many businesses from closure. The Chancellor’s economic response to coronavirus has prevented more than a fifth of SMEs (21%) from collapse, and a quarter of SMEs (24%) say measures have deferred staff redundancies.

Salary support is seen as the most effective measure introduced by the Government by half of SMEs, with grants (47%) a close second.

However, many believe support will not come in time for their businesses. A third (33%) predict it will be too late to save their business by the time they can access the support available. Uncertainty over eligibility is also a concern with 36 per cent stating they are unsure of which schemes they are eligible for. More than a quarter (26%) say the process is too complex and time consuming.

David Postings, Chief Executive of Bibby Financial Services, continued:

“Working together to protect our businesses and our economy is critical. Measures announced throughout March and April are clearly having a positive impact but many SMEs are still struggling to understand the support that is available and access it quickly.

“It is now more important than ever that the private and public sector work together to support all businesses, and that those not eligible for support through Government schemes can still access the funding they need to survive and one day thrive again.

“This is where often overlooked forms of finance such as invoice finance and asset based lending will provide a lifeline to many SMEs. Invoice financiers will enable SMEs to leverage value already existing within their businesses, reducing the need for them to take on additional debt at a time where many business owners are cautious to do so.”


The Bibby Financial Services COVID-19 Pulse survey is a poll of 500 SME owners taken from across the UK. Fieldwork for the survey ran from 2nd April – 14th April 2020. Research is conducted by Critical Research, one of the UK's leading independent market research companies.

21 April 2020

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