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July 28, 2021

Over half of UK SMEs ‘have recovered from pandemic’

By Anita Senaratna

Over half (54 per cent) of UK SMEs have already either met or exceeded pre-pandemic turnover levels, according to new research from Paragon Bank.

The figures revealed that one in five UK SMEs have exceeded their pre-Covid turnover levels, whilst 31% are now matching pre-pandemic figures. Out of the businesses still recovering, about a third of them predict they will reach pre-Covid levels ‘soon’, and one in seven view their path to recovery as ‘uncertain’.

Positive sentiment amongst SMEs was also high, increasing from 86 per cent in September to 92 per cent at the end of May.

Smaller businesses with under 100 employees reportedly recovered the fastest, with 64 per cent reporting turnover matching or exceeding pre-pandemic levels, compared to 47 per cent of larger SMEs with 100-249 employees.

The most common challenge for UK businesses was managing cashflow levels with almost two-thirds of SMEs experienced cashflow issues during the pandemic. Other common challenges were loss of profit and late payments, which were reported by 53% and 34% of SMEs respectively.

John Phillipou, managing director of SME lending at Paragon Bank, said the findings were ‘encouraging’: “We’ve seen many businesses make changes during the pandemic and prove incredibly nimble, from opening up new revenue streams and sales channels to completely transforming their offering,” he said.

“Considering that cashflow issues were the biggest challenge of the pandemic for most business owners, it’s understandable that building cash reserves continues to be a priority. On average, business owners that are comfortable with their cash reserves have 30% more in the bank than those who aren’t, so we anticipate that building a financial buffer will continue to be a priority for UK SMEs until the economy stabilises further.”

Another key theme that emerged from the findings was the significance of the government support provided to businesses. Nearly half of SMEs consider the Government to be the main source of business support during the pandemic and two-thirds of business owners approve of the level of support provided.

The furlough scheme was the most commonly taken-up Government support initiative, with 44% of businesses furloughing employees. More than one in four used the Coronavirus Job Retention Scheme, Business rates relief or VAT deferral, while the Coronavirus Business Interruption Loan Scheme (CBILS) was taken up by 19 per cent of owners.

One in four said they were looking to use the Government’s Recovery Loan Scheme (RLS), with many looking to use the scheme to help with cashflow.

John Phillipou added: “The Government’s RLS scheme is very much still in its infancy having only launched in April, so it’s great to see there is already such awareness of the scheme, with nearly one in four SME owners looking to use it in the future.”

“One of the great things about RLS is that it has relatively simple eligibility criteria, and allows businesses to either access cheaper funding, or to receive loans that lenders wouldn’t usually be able to offer as part of their ‘everyday’ lending policy. The RLS scheme is a great asset for SME owners looking to power their post-Covid recovery.”

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