UK firms have been left in a vulnerable position as government support winds down with business conditions only improving moderately in the weeks since the economy suffered a historic contraction in the second quarter of 2020.
Results from the latest British Chambers of Commerce (BCC) Coronavirus Business Tracker reveal UK firms are still reporting “high levels of reliance” on government support schemes to help curb cashflow issues.
Of those surveyed, 38% reported an increase in revenue from UK customers, up from 34% in the previous tracker, and up significantly from a series low of 3% — while 22% reported a rise in revenue from overseas customers.
Despite the progress, the number of businesses reporting an increase in UK profit is still below the number reporting a decrease, also 38%, according to the UK’s largest independent survey.
There was a slight improvement of 5% in the number of firms reporting a decline in cash reserves — at 50% compared to 55% previously.
Despite the government’s efforts to slowly reopen the economy and more businesses seeing a rise in revenue, more than one in three (39%) respondents said they have three months or less in cash reserves.
According to BCC’s tracker survey, a “significant” number of businesses cited government support schemes as a driver of increase in cash reserves, whereas 68% mentioned customer demand or new business as a factor.
Meanwhile, 34% of businesses said they used the government’s furlough scheme — 30% reported using various loan schemes and 16% reported using grant schemes.
With fears of a second virus spike and the potential reintroduction of local or national lockdowns it is still unclear what further support, if any, firms will receive when government schemes end in the coming weeks.
BCC director-general Adam Marshall, sad: “While some firms are seeing improvements in trading conditions, we are still very much in the eye of the storm, with further turbulence ahead.
“As the government’s emergency measures begin to wind down over the coming weeks, and with the prospect of further local lockdowns still very real, businesses across the UK are going to need further support to weather uncertainty over the coming months.
“Slashing the jobs tax by taking steps to reduce the burden of employers’ National Insurance contributions, big new incentives for business investment, and targeted support to help businesses placed under local lockdowns all need to be put in place now. Ministers must not wait until the economic storm is once again at fever pitch before they act.”
The BCC’s tracker survey of 502 businesses serves as a barometer for the impact of COVID-19 on businesses and the effectiveness of government support measures during the week from 3 August to 7 August.