Deloitte: world hit by a “synchronised global slowdown”
11 May 2020: The eighth COVID-19 webinar from Deloitte looked ahead to what the economic outlook might be beyond the current lockdown and compared the UK’s approach to the measures taken by other countries.
Chartered Accountants have responded positively to the government’s support strategy for small businesses during the coronavirus crisis, new research from ICAEW suggests. However, the survey also highlighted a growing unease about a potential SMEs cashflow squeeze in the next two to three months and longer-term concerns about how government can help businesses recover to anywhere near pre-crisis levels.
The survey asked more than 500 ICAEW members working in and with small businesses across the UK about the economic disruption of the past six weeks – and what their organisations would need to survive until the lockdown is lifted.
Successes and shortcomings
According to respondents, two-thirds of SMEs have applied for cash from one of the government’s schemes. The Coronavirus Job Retention Scheme (CJRS), local authority grants and business rates holidays are proving particularly successful in the eyes of ICAEW members, with many respondents reporting that funds had already reached companies.
However, the Coronavirus Business Interruption Loan Scheme (CBILS) has proved less successful at providing cash. While the survey suggests that two-thirds of SMEs had applied, only 20% had actually received money. In response to some of the criticism aimed at the various loan schemes, the government this week launched the Bounce Back Loans scheme, aimed at getting cash to smaller businesses affected by coronavirus.
Cashflow cliff edge
The research found that most small businesses are relying on their cash reserves to get them through the crisis. Companies reported cutting discretionary spending, reducing salaries and bonuses and putting staff on paid leave to get through the lockdown period. 73% of respondents said they had enough cash to operate for at least three months, but a quarter said they would run out of money by July.
SMEs are also worried about how the lockdown will unwind, and the findings suggest that a ‘cliff edge’ or sudden cessation of government support would likely jeopardise a very large number of businesses. Respondents called for the government to show flexibility and a continued commitment to providing as much support as necessary as restrictions eased and the recovery started.