22nd May 2020

Cashflow concern for 38% of SMEs

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

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

The report says glimmers of optimism are apparent: if the lockdown lasts another two weeks, respondents reported that 18% of SME clients would be trading normally, an increase from 14% last week. This is probably due to the furlough scheme which gives employers a lifeline for the short term.

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: 30% of SMEs will struggle to access cash to last two weeks of lockdown, compared to 29% last 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, said: :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.

Confidence is reflected in the four-week look-ahead: 38% of SMEs will probably / definitely not be able to access cash to last four more weeks of lockdown compared to over a half last week at 53%. And looking further ahead to a possibility of 12 weeks of lockdown, 37% said they would probably/ definitely not be able to access cash to last, compared to 69% in last week’s results.

ACCA UK and The CFN explain that the tracker does not reflect views about the ‘Bounce Back’ Loans announced on the 27 April. Bennisonand McGregor concluded that “Fundamental questions remain for SMEs. What are your needs – real estate, your employees, cash? The next two weeks will be decisive for SMEs and the accountants who work with them.”

We appreciate that these are unprecedented times and the on going outbreak of Covid-19 could affect us all. If this impacts your financial circumstances in any way please let us know as there will be ways we can help.

Source: Credit Connect

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