New research reveals that British SMEs are on track for a slow recovery next year, with half currently operating at a loss, and retailers impacted hardest ahead of the festive season. Sage continues to highlight the need for additional support of the 5.9 million SMEs, who if supported well, could lead the economic recovery in the wake of COVID-19, representing 99.9% of the business population.

The research of SMEs across the UK identifies that of those who have been impacted negatively, just 39% expect to return to pre-COVID levels of revenue in the next 6 months. But encouragingly, almost 3 in 4 (72%) SMEs feel prepared to deal with the outbreak if it lasts another 3 months, and 2 in 3 (65%) are prepared for another 6 months.

For many (39%) SMEs the Christmas period is a significant trading moment. With a few key weeks remaining to make an impact on business viability as we move into 2021, disappointingly just under half of SMEs (47%) expect revenue to remain the same for December. What’s more, 21% expect to see a decline, when compared to last year. This data further cements the view that businesses cannot trade their way out of the issues that COVID 19 has caused, with the compound impact of Brexit just around the corner.

These findings follow The Survival, Resilience and Growth report undertaken by Sage during summer 2020, which highlighted the need to enable businesses to invest to support the recovery, through helping them access technology and finance. Sage, on behalf of the country’s SMEs, called on the government to take a three-pronged approach to aid digital adoption, help to boost exports and provide tailored support that encourages entrepreneurialism by equipping the unemployed with essential business skills. 

Despite this, today’s data highlights that over 60% are still either unable to invest or unable to invest at the level they need, and only 1 in 2 feel they are getting the right level of government support. 

Paul Struthers, UK MD, Sage, said: “The findings from this research are stark. Despite hopes of a vaccine roll out being on the horizon, SMEs are depleted and any assumptions they’ll be ready to reboot the economy must be carefully scrutinised. We must recognise the importance of supporting our SMEs, the backbone of our economy, who have so far demonstrated remarkable resilience and adaptability in the face of the global pandemic. 

“Many SMEs continue to require urgent assistance, or we will run the risk of entrepreneurs falling ‘at the last hurdle’, just as the end is in sight. More than ever, we continue to call on the government to equip SMEs for the short term uncertainty and long term challenges ahead - and enable them to rebuild as part of a healthy, resilient digital economy.”

Naima Camara, Senior Small Business Research analyst at IDC said: “Our research is aligned and shows that SMBs, and particularly small businesses (less than 10 employees) in the UK have been hit the hardest by the economic ramifications of COVID-19. 

"Whilst government support schemes such as the furlough scheme and the Bounce Back Loan scheme have been instrumental in keeping many of these small businesses afloat, business has been heavily affected. In a survey conducted in October, 59% of small businesses in the UK, Germany and France said they were “surviving or sustaining their business" rather than growing, transforming their businesses or thriving. In the same survey, in the UK 60% of small businesses with under ten employees have seen a decrease in their revenue with 19.4% seeing a revenue decrease in the magnitude of 20% or more, which is difficult for any business to absorb.

"Small businesses are taking longer to bounce back from the lockdowns and are having to make difficult decisions to continue to operate in the current climate.”