One in four small UK businesses hit by cash flow crisis

Companies in the insurance and pensions sector (46%) and the charitable and voluntary sector (42%) are the most worried about late payments, according to a survey. Photo: Getty Images

More than a quarter (26%) of UK small businesses said bad cash flow was their biggest financial concern amid the economic fallout from the pandemic, a new report has revealed.

The Business Challenges report, carried out by card payment company Takepayments limited, found that these businesses are constantly on the lookout for late payments during the pandemic.

“It is concerning that one in four business owners find themselves constantly chasing late payments. It not only takes time for them, but it also has a worrying impact on them, ”said Sandra Rowley at Takepayments.

Companies in the insurance and pensions sector (46%) and the charitable and voluntary sector (42%) are the most worried about late payments, almost half expecting to chase late bill payments throughout of the year (46% and 42% respectively).

The report also says there is widespread concern about the impact of Brexit on cash flow, with 21% of small business owners worrying about it.

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READ MORE: One in three B2C companies faces a cash flow crisis

More than one in 10 companies (15%) say financial challenges will be their main concern for the coming year due to the economic crisis caused by the pandemic and subsequent lockdowns in the UK.

Almost half (49%) of small businesses expect their business to experience losses or close in the coming year.

Performing arts (33%), health (32%), creative arts and design (26%), and hospitality and event management (26%) companies are most expect to suffer a loss this year.

The report also revealed potential gaps in financial literacy in small businesses, with nearly a fifth (18%) of business owners and senior decision makers describing their knowledge of invoicing as “limited” and 19% stating that they were not sure to use online business banking.

Although the government has extended the leave scheme to help reduce the number of unemployed in the UK and ease the financial strain on business owners, three in ten (30%) admit to having cut jobs.

A report released earlier this month found record levels of small businesses seeking external financial support in 2020.

The study says gross bank lending to SMEs, excluding overdrafts, increased 82% to £ 104 billion ($ 144 billion), thanks to the use of government lending programs, with significant additional demand for such loans expected in 2021.

And a recent survey of 1,100 companies showed that just over a quarter (28%) of businesses as a whole and only a fifth (20%) of B2C companies have had cash for more than 12 months.

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