The VAT Trap that small business have to face
UK small business gears up to fight to survive this year as Covid-19 threat still persists and EU trade weakens after Brexit.
According to a quarterly survey of the Federation of Small Business (FMB), more than 250 thousand. enterprises expect their businesses to close without further government financial support.
Producers trade organization Make UK said it expects lower investment in the UK, triggering staff starvation.
Slightly less than 5% of 1,400 companies surveyed by FMB expect to end operations this year. This is the largest number in the history of a trade body index since bank crash of 2008.
If we apply this forecast to the entire UK small business market (5.9 million companies), this would mean that 295 thousand. the person is afraid that they will lose their job.
The vast majority of firms surveyed (80%) do not expect their outlook to improve over the next three months as tight restrictions are likely to remain in place.
FMB National Chairman Mike cherry said the amount of available government support has dwindled as the pandemic crisis progressed.
«At the start of the first national lockdown, the UK government was very bold. The support mechanisms created weren’t perfect, but they were a good starting point. That is why the market is disappointing with how the authorities met the second wave», – he said.
Cherry noted ongoing support for retail, leisure and hospitality businesses, but added that many of the industries are still in a very deplorable situation. It directly affected company directors, employees, supply chains and even organizations that do not require commercial premises..
FMB publishes five-point plan to help small businesses, including grants, income support and expanded debt relief.
However, Cherry warned that companies already lack the cash to cope with the tough trading environment, especially given the costs associated with adjusting to Britain’s new EU relationship..
Almost half of the federation’s members expect international sales to fall 33% from last year.
A third of companies predict a decline in investment prospects for British business after leaving the EU, and only 18% of market participants believe that the situation will improve.
Customs delays, cited by 47% of respondents, are seen as the biggest risk for companies, pushing lockdown to second place.
Chief Executive Officer, Make UK Stephen phipson said that the transition to new trade agreements with the EU will be the biggest challenge facing manufacturers this year and the fact that there is an agreement does not make things easier.
He called for a bold industrial strategy that goes beyond «short-term work», instead laying out a plan for the next decade.
As firms voiced concerns about the future, the index that tracks business output fell to its lowest level in history..
The BDO Output Rate, which measures economic data from major UK business surveys, averaged 73.62 in 2020, well below the previous low of 83.28 recorded in 2009..
«These numbers confirm how severe the economic impact of the pandemic was. Successful and rapid deployment of Covid-19 vaccines to be single largest driver of business recovery», – believes BDO partner Kayleigh crosswaite.