23% of UK SMEs had little or no savings before the pandemic hit earlier this year, including 42% of sole traders, according to new research from Nucleus Commercial Finance.
The research showed that many UK SMEs are deeply concerned about the lasting effects of Covid-19 on their business, with only two in five (39%) believing that they have enough savings to carry their business through the remaining impact of the pandemic, while 14% think they do not.
Amongst those surveyed with savings, almost £72,000 of their savings, on average, have been spent since the pandemic started, with an estimated £87,579 extra needed to get them through it. Although medium sized businesses have spent more than double that (£149,101), they expect to spend a similar amount again (£154,652) by the time they return to pre-Covid-19 levels of business.
On average, SMEs had nearly £200k (£192,511) in savings prior to Covid-19. Unsurprisingly, this grows with company size, with sole traders (£50,536) having less savings than medium sized businesses (£352,773).
Research found that SMEs’ saving pots took a considerable hit as a result of the pandemic with four in five (80%) saying they had to dip into it. This was most commonly to pay for overheads (34%) to keep the business afloat, followed closely by paying staff (27%), getting premises Covid-19 secure (21%) and getting their business online (13%).
SMEs fear their businesses will be affected by Covid-19 for up to 16 months and that the recession caused by the pandemic may last a little longer than 17 months.
Chirag Shah, CEO of Nucleus Commercial Finance, said: “The effects of the pandemic and the subsequent economic slowdown has clearly had a significant impact on the UK’s SMEs. Not only has it brought about operational challenges, but the loss of income has been devastating for them. Those businesses that have successfully weathered the storm now face further challenges – needing significant capital to ensure that they can continue to operate.
“During these uncertain times, business owners should rest assured that there are financing options available to suit their needs, while achieving their goals and helping them future-proof their business. Together, we can help build a better future for SMEs, ensuring they are equipped to tackle further challenges, boost performance, and ultimately stimulate our economy.”