The proportion of UK small businesses predicting growth has plummeted from 39% to just 14% in the last 3 months, according to the latest quarterly tracking study of small business outlook by Hitachi Capital Business Finance.
31% of business owner respondents say they scaling back their businesses and 30% saying they will struggle to survive between now and the end of June.
Since the study began in 2015, the proportion of small businesses predicting growth for the next 3 months has remained resilient, consistently standing at between 34%-39% over the last seven consecutive quarters. The bleak new data reveals the scale of the impact that the Covid-19 pandemic has had on the sector.
The industry sectors where small business owners most feared collapse were hospitality and leisure (50%), retail (40%) and transport/distribution (37%). For the first time, every industry sector recorded more business leaders predicting contraction or collapse than growth for the next 3 months.
Regionally, small businesses in Wales (73%) and Scotland (69%) were most likely to predict contraction or a struggle to survive. Conversely, small businesses in London were the most likely in the UK to predict some form of growth (19%).
Reflecting on their current trading status since the outbreak of the Covid-19 in the UK, 32% of small businesses have temporarily closed, with just 1% so far closing permanently. Further, 34% have adjusted to a home working regime, 12% have transitioned to become online businesses and 4% have diversified their services in order to stay afloat. Around one in seven (13%) reported no change to their trading status.
By sector, small businesses in hospitality (73%) and construction (47%) were most likely to have temporarily closed, retail was the sector where small businesses were most likely to have gone online (24%) – whilst IT (53%), media (51%) and legal (50%) were the sectors where home working has been most widely adopted.
The new Hitachi data also revealed that the digital status of a business before the pandemic had a direct bearing on how it now saw growth prospects for the period to the end of June. Small businesses that were largely online at the start of the year were most likely to predict growth for the 3 month period (28% compared to just 7% of offline businesses). In contrast, enterprises that were not online were more likely to fear contraction or collapse – 68% (compared to 45% of their online counterparts). Further, offline businesses were more than twice as likely than online businesses to have temporarily closed (37% to 16%) – whilst online businesses were more than twice as likely as the national average to say their business had seen no change to their trading status since the outbreak of the pandemic (28% compared to 13%).
Gavin Wraith-Carter, MD at Hitachi Capital Business Finance commented: “Small business outlook in recent years has at times defied gravity. Through the uncertain periods of the Brexit era, the Scottish Referendum and various UK General Elections, our study has shown small business outlook to be stoic and positive. The current climate though has brought a sudden and seismic shift in confidence and outlook. Many small businesses have been unable to trade and many are having to revise growth forecasts as the whole supply chain has been shaken by the current period of lockdown.
“Whilst we expected to see a big fall in confidence for this quarter, the true test will be if and how it recovers during the summer months. The fact that only 1% of small businesses have permanently closed their doors suggests the majority will bounce back.
“We predict the digital economy will be bigger for the small business sector and business owners will have to diversify and adapt. As the country looks to get back on its feet the small business sector will be more important than ever to power economic growth for the country at large.”