Coronavirus: One in three business-to-consumer firms face cash crisis

Saleha Riaz
·4-min read
The report said that more government support is needed until firms can fully reopen. B2C firms are currently operating at only 42% of full capacity. Photo: Getty Images
The report said that more government support is needed until firms can fully reopen. B2C firms are currently operating at only 42% of full capacity. Photo: Getty Images

Almost a third (31%) of business-to-consumer (B2C) firms say they will run out of cash in the next three months as they tackle with the economic fallout of the coronavirus pandemic, the British Chamber of Commerce (BCC) said in a new report in which it urged the government to continue to support companies.

A survey of 1,100 businesses also showed that just over one quarter (28%) of firms overall and only one-fifth (20%) of B2C firms have cash for more than 12 months.

BCC director-general Adam Marshall said: “The last year has taken a heavy toll on businesses across the UK. With cash flow still the top concern, it is vital that the UK government keeps financial support going until firms can reopen and rebuild.

"Pulling the plug now would be a huge mistake, and would be akin to writing off the billions already spent helping firms to survive."

B2C service firms are also significantly more likely to report decreased revenue (74%) from UK customers.

The report said that more government support is needed until firms can fully reopen. B2C firms are currently operating at only 42% of full capacity, while all firms were averaging 57% capacity against a pre-pandemic level of 75% to 80%.

The business group has called on the UK government to set out “a clear roadmap for reopening, advancing vaccination and workplace testing plans, and extending key financial support measures for businesses throughout 2021.”

The report also found three in every five firms (61%) have seen their revenue from UK customers fall in the last three months.

A quarter of survey respondents (25%) say they will make staff redundant if financial support stops in March and April.

Compared to October 2020, 61% of firms reported decreased revenue from UK customers. Only 19% of firms reported increased revenue and 20% reported no change.

When asked approximately how long firms could continue until they ran out of cash, almost one-quarter (23%) said less than three months. This figure rises to almost one-third (31%) of B2C service firms.

“The results paint a bleak picture of a business landscape which has been severely squeezed by repeated lockdowns and massive changes in trading conditions,” the report said.

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READ MORE: UK inflation creeps up in lockdown

When asked to rate the effectiveness of the various government schemes to support their business throughout the crisis, the Coronavirus Job Retention Scheme, allowing firms to furlough staff, had by far the highest effectiveness rating.

More than two-thirds (68%) using this scheme say that it has been very effective, with a further 28% rating it as somewhat effective. Only 4% said it was not effective.

Business rates relief (49%), VAT deferrals (34%), and VAT cuts for certain sectors of the economy (26%) were also rated as very effective.

When asked what their business might do if the government support schemes end in March and April, 25% of firms overall said they would ‘make staff redundant’, 25% would ‘reduce staff hours’ and 19% would ‘cancel or reduce investment or recruitment plans’.

Only 21% of B2C firms said the expiry of support ‘would have no impact on their business’, compared with 39% of B2B firms and 37% of manufacturers.

Meanwhile the UK government is being urged to "boost it like Biden" and quadruple its crisis spending to £190bn ($264.8bn) to tackle the economic fallout from the coronavirus.

A briefing paper from the think tank the Institute of Public Policy Research found that the economic boost so far announced by chancellor Rishi Sunak for the year from April (fiscal year 2021/22) is worth about 2% of the value of the entire UK economy before the pandemic (2019).

It suggests that a significantly more powerful boost of £190bn (263bn), equivalent to 8.6% of the value of the economy, would deliver faster recovery, stimulate business investment to its pre-pandemic level and halve the number of job losses – without risk of causing high UK inflation.

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