MORE than a half-a-million UK businesses are facing a high risk of insolvency, and 250,000 may not survive another month without a change to trading conditions.
A second wave of infections and an extended lockdown could prove fatal for much of the business community, according to preliminary results from a business distress tracker which found 1.1 million businesses will not survive three more months of lockdown.
The fortnightly Opinium-Cebr Business Distress Tracker polls businesses across the country. It shows business leaders need six months, on average, to return production to pre-crisis levels. One in six firms will need at least a year. The figures dash hopes of an immediate bounce-back once restrictions are lifted. UK GDP is forecast to remain below 2019 levels until 2022. During the first 30 days of the national lockdown, business profits were down an average of 29 percent.
Pablo Shah, senior economist at Cebr, said the results provide a “first glimpse of the deep and long-term scars that the coronavirus crisis is set to inflict upon the UK economy”.
Even for survivors, he said, the recovery looks set to be slow.
“These figures dash hopes of an immediate bounce-back … and point to a prolonged period of subdued output that is set to last for a period of years.”
James Endersby, chief executive at Opinium, said the figures “make for very sombre reading”. The impact was being felt in almost every region, sector, business size and level of employment, he said, adding: “It’s unavoidable.”
“The government’s comprehensive plan to unlock and restart the economy is well-anticipated – and desperately needed,” he said.
The tracker also shows that most UK firms have implemented workplace adjustments, with 35 percent of employees on furlough. Smaller businesses (10-49 employees) seem likely to take advantage of the government’s Coronavirus Job Retention Scheme. Almost a third of employees have seen a reduction in their working hours, and a similar proportion have experienced wage cuts.
The lockdown is expected to be gradually eased in coming weeks, but there are fears of “economic carnage” should a second wave of infections appear.