Half a million businesses at risk of collapse without more support

9m jobs could disappear if 600,000 stricken businesses are allowed to go under without more Covid pandemic financial help

More than half a million businesses are at risk of collapse by the spring unless the government extends Covid business support.

So says thinktank the Institute for Public Policy Research (IPPR) in its latest report.

The 600,000 businesses at risk of collapse without more support together employ approximately 9m people, “whose jobs could be lost” said the left-of-centre thinktank.

Small businesses (which together are responsible for a large share of UK employment) are most at risk of bankruptcy. About 40 per cent of firms with fewer than 50 employees have less than three months of remaining cash reserves.

>See also: SME owners hold £1.2bn of personal liabilities linked to Covid-19 loans

Half of all hospitality, food and other specialist service companies have less than three months’ cash left, as do 40 per cent of arts and entertainment businesses.

Overall, the number of companies with “dangerously low” cash buffers has risen sharply over the four months to the end of January, as national lockdowns slash trading, the IPPR said.

The chancellor should use the March 3 Budget to extend the furlough scheme, due to end in April, issue more grants, and take equity stakes in businesses in exchange for cash injections, creating what it calls a “Citizens’ Wealth Fund”.

>See also: Local authorities blame government for slow release of Covid-19 grants

“Millions of people’s jobs and livelihoods depend on the Chancellor stopping firms going broke just as the pandemic is coming under control, and ensuring that they have enough cash not just to limp through this crisis but to come roaring out of it when lockdown ends,” George Dibb of the IPPR told the Telegraph.

“By extending and improving the current support schemes, and by taking the new route of injecting cash into firms in return for a long-term stake in their future, the government can ensure that our best businesses survive and can leap back into action as our economy recovers from this long hibernation.”

Further reading

Budget 2021 and what it means for small business

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Tim Adler

Tim Adler is group editor of Small Business, Growth Business and Information Age. He is a former commissioning editor at the Daily Telegraph, who has written for the Financial Times, The Times and the...