London-based SMEs will be the worst affected by coronavirus according to new research by small business insurer Simply Business.
The SME Confidence Report spoke to 3,700 SME owners across the UK to measure the impact of coronavirus on small businesses and found that in London the pandemic will cost SMEs £17,074 each on average in lost work, earnings and loan repayments. That’s £6,000 higher than SMEs based in the South West, and over £5,000 higher than the national average (£11,779).
Meanwhile more than one in 10 (13%) London-based SMEs will be facing costs of between £30,000-£75,000 in lost work, earnings and loan repayments.
Additionally, just under two thirds (61%) of SMEs in London have had to temporarily stop trading, while 7% have already permanently shut down – equating to approximately 76,300 SMEs*.
The figures come as the total cost of coronavirus to SMEs across the the UK is set to exceed £69 billion**.
For those that remain open, well over two fifths (44%) of SME owners in London fear their business is at risk of permanently closing. Almost one in five (17%) believe their business may only have 1-3 months left before closure, and a further one in 10 (10%) say they could be shut within 3-6 months.
However, as the economy emerges from the crisis, London is set to remain a key hub for SME activity.
Despite the capital facing the greatest cost, Simply Business expects to see the highest number of new start-ups emerge from the capital, with 15% of owners surveyed saying they plan to start a new business after coronavirus, compared to the 8-9% average across the country.
This could potentially see up to 163,500 new SMEs start up in London alone after coronavirus***, helping to negate some of the effects of those lost.
Encouragingly, 70% are confident of continuing (or re-starting) with their existing business. One in five (22%) have even declared themselves ‘optimistic’ about their business’ chances after coronavirus.
The study also looked into the use of government small business schemes. Worryingly, almost half (49%) of SMEs haven’t been able to apply for government support, while less than a third reported it being easy to find (30%).
Two in five (40%) said they don’t feel supported by the government and just under a third (30%) said the help they’re getting just isn’t enough.
As a result, London-based small business owners have sourced finance from a number of other places. Well over a third (37%) have resorted to borrowing from friends and family, one in five (20%) are using credit cards. A further one in 10 (11%) have taken out a private bank loan to cover costs.
Alan Thomas, UK CEO at Simply Business, commented: “Covid-19 has had a significant impact on SMEs and small business owners up and down the country – with many being forced to sadly close.
“And there are few feeling the effects more than the London-based self-employed community. Covid is set to cost SMEs in the capital over £17,000 on average – around £5,000 higher than the national average.
“Small businesses are crucial to all aspects of London life – from the communities they serve, to the economy they power. We’ve all been eager to see more small businesses have the opportunity to restart their trading, and know many are relieved to have opened up their doors this week. However, with social distancing measures and strict government guidelines still in place, the challenge is far from over for most.
“London has long been seen as a key hub for small business enterprise growth, and we’re encouraged by the prospect of so many entrepreneurs either continuing with their current business, or planning to start a new one. We could see the emergence of a vast number of small businesses in the months to come – something which should be considered a huge positive.
“Once again small business owners are showing their resilience, and we expect to see levels of optimism rise as lockdown continues to be eased.”
Simply Business has launched a free Financial Support Checker to help small businesses, landlords and the self-employed to quickly determine what financial support and schemes are available to them during the coronavirus pandemic.
A simple questionnaire takes business owners just a few minutes to complete and will point them towards relevant government schemes and financial support.
*1,090,000 SMEs in London at the end of 2019. 7% of 1,090,000 = 76,300
Source: House of Commons Business Statistics Briefing Paper No. 06152
**See methodology- 15% of the 1,090,000 SMEs in London = 163,500
Notes to editors:
Full regional breakdowns available upon request
Methodology: Data: Survey of 3,734 small business owners from across the UK, conducted May 2020
Average cost of coronavirus per small business, including lost work, earnings and loan repayments:
London – £17,074.36
Scotland – £15,483.65
North East England – £15,039.52
South East England – £12,753.44
Wales – £11,804.82
North West England – £11,494.86
The Midlands – £11,079.12
South West England – £10,989.60
Total number of respondents for each region:
London - 430
North East England - 410
Scotland - 390
South East England - 627
Wales - 231
The Midlands - 659
South West England - 441
North West England - 519
How did we calculate the £69 billion figure?
100% of small business owners surveyed reported being affected financially by the coronavirus pandemic.
We asked small businesses how much they estimate the coronavirus pandemic will cost them in total, including lost earnings, jobs and revenue. The weighted average of this cost is £11,779.
£11,779 multiplied by the number of SMEs in the UK = £69,024,274,091.
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Launched in 2005, Simply Business provides an online brokerage service, delivering policies tailored to individual business requirements. Using the power of tech and data to create the best possible customer experiences, Simply Business employs over 600 people across offices in London, Northampton, and Boston in the US.
Owing to its internal underwriting capability, Simply Business can cover over 1,000 trade types – ranging from plumbers to accountants to dog walkers. An accredited B Corp for their positive social impact, Simply Business has also been voted the Sunday Times Best Company To Work For twice in a row.
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