More than half a million UK employers are at risk of collapse in spring as cash reserves fall perilously low, according to new analysis by the IPPR think tank. Between them they account for one third of business turnover and employ some 9 million people, whose jobs could be lost if the cash crisis for firms of all sizes is not quickly addressed, IPPR warns.
Their analysis has found:
- The number of firms with less than three months’ cash reserves, considered a danger point for a business, rose sharply over the four months to the end of January – from one in four to one in three – despite two new rounds of cash grants for firms compelled to close during lockdown.
- Small businesses – those employing fewer than 50 people – are at greatest risk, with 40 per cent now having less than three months cash buffers.
- Half of all firms involved in hospitality, food and other services are now dangerously low on cash, as are 40 per cent of those in the arts, entertainment and recreation sector – with almost all sectors significantly shorter of cash than in the autumn
Existing business support schemes are currently due to end in late March and April, including loan guarantees, the business rates holiday and furlough support. Most companies will soon be expected to begin repaying government-backed loans made during the pandemic, and to start paying backdated VAT bills for the past year.