An estimated 35,070 Scottish small and medium sized enterprises (SMEs) say it is likely their business will close permanently in the next 12 months as a result of the coronavirus crisis.
This figure could rise to 54,776 in the event of a second national lockdown, according to a recent survey by Virgin Money.
The research is reported in the latest Virgin Money Business Pulse, which provides a comprehensive insight into the performance of the UK’s SMEs and the environment in which they operate.
Across the UK as a whole, the survey, which was conducted in early September, revealed that almost one million SMEs fear they could close if there was a second lockdown.
Despite lockdown restrictions easing over the summer months, 64 per cent of SMEs’ profits over the past 30 days decreased due to coronavirus-related disruption, compared to expected profits for this period prior to the outbreak of the pandemic. 55 per cent of these businesses believe it will take more than six months for profits to recover to pre-lockdown levels.
Underlining the continuing precarious situation, 17 per cent of businesses say it is very likely or somewhat likely they will be forced to close permanently in the next 12 months. This number rises to almost a quarter (24 per cent) when considered in the context of a potential second national lockdown, similar to that seen in March and April.
A key turning point for SMEs will be the closure of the Coronavirus Job Retention Scheme at the end of October with 42 per cent of SMEs (excluding sole traders) expecting their workforce to be smaller in December than it is in September.
However, the survey also uncovers some positives, with 15 per cent of SMEs stating their profits were unaffected during lockdown and 10 per cent noting their profits were higher, as demand for specific products, such as food and PPE, increased.In addition, the lockdown has prompted almost a quarter (23 per cent) of SMEs to update their strategy, and 12 per cent have improved existing products and services.
Gavin Opperman, group business director at Virgin Money, said: “The results make for sober reading, but they are unsurprising given the extraordinary disruption of the last six months.The Covid-19 pandemic has caused the deepest recession on record and recovery is slow, despite the national GDP figures regaining ground.The UK’s SMEs have experienced unprecedented strain, with sales and profits affected by workplace closures, supply chain disruption, diminished productivity and declining household incomes.
“Despite the pickup in economic activity in the summer months, businesses are by no means out of the woods.As we head into the autumn and winter months with newly introduced restrictions, the next six months will be critical for many businesses.
“On a brighter note, the pandemic may offer SMEs the chance to continue longer-term with the new and more flexible work patterns the pandemic necessitated, helping to rebalance the spread of wealth and opportunity across the country.”.
*Calculated by The Centre for Economics and Business Research (CEBR), with research conducted by Censuswide from 04/09/20 to 07/09/20, with 501 SME decision makers
ENDS
For further information contact:
Virgin Money Press Office: [email protected] / 0800 066 5998
Christina Kelly: [email protected] / 0748 490 5358
Simon Hall: [email protected] / 07855 257 081
Notes to Editors
Research
The research for Virgin Money was carried out online by Censuswide throughout 04/09/2020 to 07/09/2020 amongst a panel resulting in 501 SME decision makers aged 18+ responding. All research conducted adheres to the MRS Codes of Conduct (2010) in the UK and ICC/ESOMAR World Research Guidelines. Censuswide is registered with the Information Commissioner’s Office and is fully compliant with the Data Protection Act.
Data History
Virgin Money UK has collected economic data on SMEs since 2014. This was previously published in the SME Health Check Index and has been included the Virgin Money Business Pulse to show historical trends.
Virgin Money support for SMEs
Virgin Money has supported around 25,000 business customers with lending support facilities, including Coronavirus Business Interruption Loans (CBILS) and Bounce Back Loans (BBLS). As at the end of July in Q3 results, this stood at just under £900m of support provided (£619m of BBLS and £248m of CBILS).
Business customers have been given three-month capital repayment holidays and six-month extensions to overdraft and loan facilities with no charges.
·Virgin Money Relationship Managers have proactively engaged with customers early to offer speedy support.
·Virgin Money’s aim is to ensure that, wherever possible, viable businesses are helped through the period of cashflow challenge.
Rebrand of Clydesdale and Yorkshire Bank
The heritage Clydesdale Bank and Yorkshire Bank brands will rebrand to Virgin Money Business early in 2021.
About Virgin Money
Virgin Money is the new disruptive force in UK banking. Bringing together the combined history and expertise of Clydesdale Bank, Yorkshire Bank and Virgin Money. It is the only bank outside the ‘Big 5’ that boasts a genuine full-service personal and business banking capability.
Serving 6.6 million customers across the UK through a digital-first approach that offers leading online and mobile services, supported by telephone and branch banking, including a national network of branches and business banking centres.It is structured around three divisions – personal, mortgages and business – offering a full range of products and services for consumers and small and medium sized businesses, delivered through its leading technology platform to deliver a consistently world class experience for customers.
Its ambition is clear – to make Virgin Money a new force in consumer and business banking that will disrupt the status quo.
Disclaimer
This document and the related research report may contain forward looking statements, based on assumptions and/or targets. Actual results may differ. Certain figures used are subject to rounding. Neither this document nor the report constitutes an investment or research recommendation, or any other form of investment advice, and no reliance should be placed on, and no liability or responsibility is accepted for, any information contained in this document or the report in respect of any investment decision. All lending decisions are subject to status.
The report has been produced by Cebr.The views expressed therein are those of Cebr only and are based upon independent research by it. The report does not necessarily reflect the views, financial position, business strategy or intentions of Grayling, Proxima or VMUK, its group companies, or their directors or employees.
Virgin Money UK PLC is registered in England and Wales under the company number: 09595911, and has its registered office at Jubilee House, Gosforth, Newcastle Upon Tyne, England, NE3 4PL.
Virgin Money UK PLC is a member of the Virgin Money group of companies (“the Group”). The Group includes Clydesdale Bank PLC, Virgin Money UK PLC, each subsidiary or holding company of Virgin Money UK PLC from time to time and each subsidiary from time to time of any such holding company. A complete list is available on request.
Clydesdale Bank PLC, which trades as Clydesdale Bank, Virgin Money, Yorkshire Bank and B, is registered in Scotland No: SC001111 and has its registered office at 30 St Vincent Place, Glasgow, G1 2HL.
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