Research: 70% of UK micro enterprises doomed to heavy loss over COVID-19

13 / 04 / 2020

By Marwa Nassar - -

Sheffield University urged the UK government to support micro enterprises amid expectations that 70 percent of micro businesses are expected to lose more than half of their annual turnover due to the coronavirus (COVID-19) crisis.

The University of Sheffield conducted a research in association with Small Business Britain. The survey focused on micro businesses – defined as companies with up to nine employees – which account for 96 percent of the UK’s total business population, contribute £533 billion to the economy and collectively employ more than nine million people.

Academics from the University of Sheffield’s Management School have surveyed over 1,500 micro business owners to assess the resilience of the UK’s most vulnerable firms, many of which feel they have been overlooked amid the Covid-19 pandemic.

Challenges facing micro businesses:

They found 67 percent are now “very” or “somewhat” lacking in confidence, with just two percent very confident about their prospects – believed to be some of the worst figures on record.

About 78 percent of micro businesses said cash flow was their biggest problem, followed by a drop in customer demand (58 percent) and difficulty accessing finance (27 percent). The overwhelming majority (93 percent) do not have any insurance to mitigate losses caused by the Covid-19 pandemic.

Despite these challenges, more than half (55 percent) have not sought any business advice to help them through the crisis – but highlighted marketing and sales, business resilience and financial planning as areas where they needed help.

The study found micro businesses are responding to the pandemic in different ways. The biggest challenge is engaging and supporting those micro business owner-managers, particularly those delivering face-to-face services, who do not feel able to respond or who have suspended or ceased operations.

The University of Sheffield academics have called on the government to prioritize support for these firms, allocating resources according to the greatest levels of need.

One third of micro businesses seek change:

However, some micro businesses have been able to change their business models by shifting their operations online. One in three are looking to sustain their businesses by going online, while around a quarter (26 percent) are offering new products or services and tapping into emergency funding (24 percent).

The research shows that micro businesses take a positive view of the government’s business support package, but are concerned about the uncertainty around local delivery and how quickly they will receive financial aid – with many fearing they will collapse before support reaches them.

Awareness and eligibility are also key issues, with many micro businesses uncertain whether they qualify for a small business grant, and not accessing business support. Uncertainty over when the support is going to be received hinders any attempt to plan for continued operations.

Professor Tim Vorley, Chair in Entrepreneurship at the University of Sheffield, who led the study, said: “Much of the government’s focus so far has been on SMEs and larger companies, but micro businesses represent a significant proportion of our economy, and are especially vulnerable to this unprecedented socio-economic shock.”