New research from Aldermore bank, reveals that the COVID-19 pandemic has caused a 30% loss in monthly business income; a small improvement from 34% in April for the average small and medium-sized enterprise (SME). Nearly one in five (18%) small businesses have seen a decrease of more than 70% of their business income.
To ensure their survival, many businesses are proactively taking steps to protect their business. Two in five (38%) SMEs have adjusted their business plans due to the pandemic as they anticipate future issues such as a fall in revenue (38%), another period of lockdown (32%) and an ongoing period of economic downturn (30%).
Tim Boag, Group Managing Director, business finance at Aldermore, said: “Whilst the economy has started to open up, the Covid-19 pandemic continues to have a profound impact on the SME community. The current situation is uncertain, and the threats of further localised lockdowns are a concern to businesses who are trying to recover from the economic shock of the pandemic. However, it’s encouraging to see that SMEs are being resilient in the face of the adversity and we praise their efforts to adapt their business models, find different and innovative ways to increase income, as well as diversifying into new markets.”
SME resilience in the face of COVID-19
UK SMEs have demonstrated resilience to the COVID-19 pandemic in different ways. 69% of SMEs have looked for ways to increase income. A fifth of SMEs (20%) have increased the amount they communicate with customers and clients, 18% have moved more of their business online, and 10% have pivoted to a new market (up from 7% in April 2020). Meanwhile, a small number of SMEs (8%) have managed to increase their business income during this period.
In addition to taking steps to increase their income, two thirds (67%) of SMEs have continued to cut costs to cover their losses, making an average saving of 25% on business expenditure. Strategies have included reduced operating costs and discretionary spending (20%).
One in twelve SMEs (8%) have applied for a loan through the Coronavirus Business Interruption Loan Scheme (CBILS) and 7% have done so through the Bounce Back Loan Scheme (BBLS). The research indicates that 16% of small businesses are using the furlough scheme as a cost cutting strategy.