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UK businesses owed around £133 billion for payment of goods and services since lockdown, survey shows

Written by Latifa Yedroudj on Tuesday, 30 June 2020. Posted in Financial management, Finance

90% of UK SMEs are waiting to be paid for work done since March 2020, according to research by fintech business lender Market Finance

UK businesses owed around £133 billion for payment of goods and services since lockdown, survey shows

90% of UK SMEs are waiting to be paid for work done since March 2020, according to research by fintech business lender Market Finance

With coronavirus lockdown measures now easing up, thousands of businesses across the UK will be returning to work in the next few weeks. Earlier in March, companies were forced to shut down and adhere to government lockdown guidelines. Because of this, many SMEs are now facing late payments for goods and services provided. According to research by fintech business lender Market Finance, UK businesses are owed approximately £133 billion for work done before lockdown.

Nine in ten businesses are waiting to be paid an average of £148, 917 for work done since March 2020 when the coronavirus outbreak begin, research by fintech business lender Market Finance has shown. Due to the current pandemic, the majority of UK SMEs (81%) are also expecting to wait longer to be paid for the goods they provide. Half of these businesses anticipate waiting anywhere between 14-30 days beyond the normal term of 45 days, meanwhile, 15% reported they would expect to wait anywhere between 3-6 months past 45 days to be paid for work.

The Coronavirus Business Interruption Loan Scheme (CBILS) was implemented by the government to provide financial support to smaller business affected by the coronavirus pandemic. However, only 43% of businesses who applied said they were successful in securing a loan, the survey revealed. The typical loan taken by these businesses was £211,667, though they applied for almost double this amount. The research was based on a survey of 2000 UK companies conducted 17-20 June 2020 by LM Research & Marketing Consultancy. The £133billion figure is based on 891,000 businesses declaring monies outstanding since 20th March 2020, and 90% of companies surveyed that match these criteria.

“The reopening of the UK’s high streets marked the first buoyant moment for UK businesses in months but it might well be the calm before the storm,” Anil Stocker, CEO at MarketFinance, said. “Businesses are facing a three-pronged assault on their finances. First up, its alarming that only half of their CBILS loans are being granted, then we learn that they have close to £150k in outstanding payments since the lockdown began and now, it’s likely that they will have to wait twice as long to get paid for new work they do whilst demand and economic activity normalises. This coupled with a very moderate outlook for trading conditions, ‘rent quarter day’ this week and uncertainty about their workforce, no doubt this will put further pressure on businesses.”

She added: “Given the continuing uncertainty around how the country returns to ‘business as usual’, I would urge business owners to look beyond their banks and seek advice as soon as from other lenders, business advisors and mentors. The earlier they do this, the wider the range of potential solutions they’ll have open to them.”

On a good note, 45% of businesses are optimistic demands for services and products will increase as the lockdown eases and shoppers return to the high streets, research showed. With that said, most businesses expect a 10% increase in sales over the next 3 to 5 months. A fifth of businesses anticipate a 25-50% increase in sales, but one in six expect a decrease in sales of more than 75%. In March, the majority (56%) felt business would normalise by September 2020. However, now the majority (57%) feel it could take as long as 1-2 years and have put plans in place for this.

As a result of the coronavirus pandemic, 85% of business owners have felt out of control in their business over the past 3 months. Given the impact of COVID-19, the lockdown, recession fears and a no-deal Brexit, 60% of business owners feel exposed to conditions beyond their control.

With the lockdown measures now easing, businesses are preparing to make the transition and bounce back from this difficult time. However, it is no question that SMEs will face several setbacks for months to come, and it is unlikely that major issues will be resolved by the time lockdown officially ends. Businesses are urging the government to provide more assistance to help plug the cash flow gap and get their foot back on the accelerator.

About the Author

Latifa Yedroudj

Latifa Yedroudj

Latifa Yedroudj has joined the Elite team to fully immerse herself in the business side of journalism, a strong passion of hers cultivated from young having co-run her mother's start up business since she was 18. Her interests lie in a wide range of subjects, including start ups, business, travel, and anything entrepreneurial she can get her hands on. She has worked for some of the biggest names in journalism including The Guardian and The Mirror. Follow her on @latifayed on Twitter for her latest journo rants.

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