London-based SMEs will be the worst affected by coronavirus according to research by small business insurer Simply Business.
The SME Confidence Report spoke to 3,700 SME owners across the UK to measure the impact of coronavirus on small businesses and found that in London the pandemic will cost SMEs £17,074 each on average in lost work, earnings and loan repayments. That’s £6,000 higher than SMEs based in the South West, and over £5,000 higher than the national average (£11,779).
Meanwhile more than one in 10 (13%) London-based SMEs will be facing costs of between £30,000-£75,000 in lost work, earnings and loan repayments.
Additionally, just under two thirds (61%) of SMEs in London have had to temporarily stop trading, while 7% have already permanently shut down – equating to approximately 76,300 SMEs.
The figures come as the total cost of coronavirus to SMEs across the the UK is set to exceed £69bn.
For those that remain open, well over two fifths (44%) of SME owners in London fear their business is at risk of permanently closing. Almost one in five (17%) believe their business may only have 1-3 months left before closure, and a further one in 10 (10%) say they could be shut within 3-6 months.
Room for optimism in the capital?
However, as the economy emerges from the crisis, London is set to remain a key hub for SME activity.
Despite the capital facing the greatest cost, Simply Business expects to see the highest number of new start-ups emerge from the capital after the Covid-19 crisis, with 15% of owners surveyed saying they plan to start a new business after coronavirus, compared to the 8-9% average across the country.
This could potentially see up to 163,500 new SMEs start up in London alone after coronavirus, helping to negate some of the effects of those lost.
Encouragingly, 70% are confident of continuing (or re-starting) with their existing business. One in five (22%) have even declared themselves ‘optimistic’ about their business’ chances after coronavirus.
The study also looked into the use of government small business schemes. Worryingly, almost half (49%) of SMEs haven’t been able to apply for government support, while less than a third reported it being easy to find (30%).
Two in five (40%) said they don’t feel supported by the government and just under a third (30%) said the help they’re getting just isn’t enough.
As a result, London-based small business owners have sourced finance from a number of other places. Well over a third (37%) have resorted to borrowing from friends and family, one in five (20%) are using credit cards. A further one in 10 (11%) have taken out a private bank loan to cover costs.
Alan Thomas, UK CEO at Simply Business said, “Covid-19 has had a significant impact on SMEs and small business owners in London – with many being forced to sadly close. Following the first nationwide lockdown, some have been fortunate to resume trading and begin getting back on their feet. But with the recent escalation in tiers and restrictions in the capital tightening, this could be a double blow for some.
“There are few feeling the effects more than the London-based self-employed community. Covid is set to cost SMEs in the capital over £17,000 on average – around £5,000 higher than the national average.
“The government has a clear duty to protect public health throughout the pandemic, but it’s obvious that any decisions – whether that’s on fiscal policy, further lockdowns, or future packages of financial support – will also have a huge impact on the rate of recovery for small businesses, and ultimately, the UK economy.“Small businesses are crucial to all aspects of London life – from the communities they serve, to the economy they power. We’ve all been eager to see more small businesses have the opportunity to restart their trading, and know many are relieved to have opened up their doors this week. However, with social distancing measures and strict government guidelines still in place, the challenge is far from over for most.
“London has long been seen as a key hub for small business enterprise growth, and we’re encouraged by the level of optimism that remains among many SME owners, with many entrepreneurs either continuing with their current business, or planning to start a new one after coronavirus. We could see the emergence of a vast number of small businesses when we finally emerge from coronavirus – something which should be considered a huge positive.”