Bounce in SME confidence weakened by small firms folding, health tracker finds

Accountants representing over 20,500 SME clients in the UK have reported more businesses deciding to dissolve or liquidate in the last week, despite a bounce in confidence about the long-term situation due to the Covid-19 pandemic.

This is according to the latest ACCA UK and The Corporate Finance Network’s (CFN) SME Health Tracker, showing 5% of SMEs have decided to close compared with 3% last week.

However, ACCA said that “glimmers of optimism” are still apparent with figures showing that if the lockdown lasts another two weeks, respondents reported that 18% of SME clients would be trading normally, an increase from 14% last week.

However, when it comes to access to cash during over a two week time-frame, the findings reveal little movement in the tracker, continuing to show CBILS is “failing to provide the promised lifeline” with 30% of SMEs set to struggle to access cash to last two weeks of lockdown, compared with 29% last week.

Confidence is also reflected in the four-week look-ahead with 38% of SMEs probably/ definitely not being able to access cash to last four more weeks of lockdown compared with over a half last week at 53%.

Looking further ahead to a possibility of 12 weeks of lockdown, ACCA revealed that 37% said they would probably/ definitely not be able to access cash to last, compared with 69% the previous week.

Claire Bennison, head of ACCA UK, said: “Some SMEs are no better off. While the furlough scheme has offered some respite, many small businesses need to be prepared for when the scheme ends in June.

“SMEs need to be thinking about the long term too, as cash needs to be in place post-furlough – they need to explore all options, including the Bounce Bank loans announced as we closed the survey. This is where qualified accountants can help them navigate the options available as they need to look beyond CBILS.”

Kirsty McGregor, founder of The CFN, and an accountant, added: “What we’re seeing here is a split in sentiment, optimism pushing against consistent concerns about cashflow. We’ve seen reports about more businesses intending to open – Greggs, Timpsons, B&Q, Persimmon – so this slow trickle of back to normal by high street names is filtering through to show cautious confidence for the long term.

“But my experience is that CBILS are still very slow – how will banks deliver these, plus the new Bounce Back Loans, when they’re already stretched and without resources?”

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