Almost a fifth of SMEs will not survive the coronavirus crisis, according to new findings from the Corporate Finance Network.
The group predicted that the closures would take place within the next four weeks despite government support measures, as the pandemic continues to unfold and affect retail.
The network, which represents independent accountancy firms across the UK, undertook research amongst 13,000 SMEs to obtain the findings.
It said that the situation “looks even more dire” if the lockdown lasts three months or more, with accountants in the network reporting that 31% of SMEs will have closed down by June.
This research also predicts that almost four million people will lose their jobs in the next few weeks.
The findings come despite measures put in place by chancellor Rishi Sunak to protect businesses as the crisis continues, including the Coronavirus Business Interruption Loan (CBIL) scheme.
The scheme is aimed towards smaller businesses with a revenue of up to £45m, and can provide loans of up to £5m, with the government covering the first 12 months of interest payments.
The chancellor had said: “Any good business in financial difficulty who needs access to cash to pay their rent, the salaries of their employees, pay suppliers, or purchase stock, will be able to access a government-backed loan, on attractive terms”.
Despite this, the Corporate Finance Network in an attempt to stop this happening, it has now put together a solution for the UK government to adopt, based on a ‘Rescue and Recovery’ incentive for SMEs.
The solution would ask the “more robust” small businesses to buy the “at risk” businesses in their sector, with a “view to retaining the employees and maintaining the trade and turning it around once the lockdown is over”.
Kirsty McGregor, founder of The Corporate Finance Network, said: “We have taken it upon ourselves to create a robust and fully researched ‘plug and play’ solution for the logistics of this SME rescue scheme.”
“We are asking the Treasury to fully consider our proposal, with them underpinning it with grants for supporting employment. In addition, it would require a series of tax reliefs for corporation tax and longer term capital gains tax which represents a return for the risk the government is asking companies to take when merging with a failing business.”
She added: “Historically, over the last three years in the UK, there has been just over 4,500 acquisitions by SMEs; to save a significant percentage of the UKs economy and keeping almost 4 million people in jobs, we need to encourage and facilitate 250,000 deals within the next few weeks.
“We can absolutely do this by incentivising them, supporting them, and with the full backing and incentive of the UK government.”