Cost of Covid-19 to UK small business exceeds £109 Billion

A new report reveals the cost of Covid-19 to small businesses now sits at £109.6 billion, two years on from the UK’s first national lockdown – with one in six believing they will never recover financially from the pandemic.

The study by one of the UK’s largest providers of small business insurance, Simply Business, revealed that 87% of small business owners have lost money over the last two years, averaging £20,981 each in total, with many still suffering financially.

Many still in financial recovery

With one in six small business owners believing they will never financially recover from the pandemic, this represents almost one million UK small businesses in total.

While others are more confident of eventually recovering financially, the outlook remains bleak, with 43% of owners saying it will take at least another year.

What’s more, one in five (21%) don’t expect to ever return to pre-pandemic trading levels.

As many small business owners continue to struggle financially, it’s no surprise to learn that one in three (32%) live in fear about running out of money. At the same time, almost one in four (23%) are concerned about being able to pay back government and private loans, or friends and family.

An evolving challenge

Despite one in six (16%) believing that their business is now better prepared for the future following the events of the last two years, small business owners are now facing a unique set of challenges as we continue to emerge from the pandemic.

Indeed, 70% of owners now state that rising costs are their single biggest challenge. This is followed by losing regular customers (63%) and supply shortages (35%). Others report losing long-standing contracts (25%), and are facing recruitment challenges (9%) and labour shortages (8%).

While Boris Johnson’s lifting of Covid restrictions earlier this year was predicted to give business a boost, 31% believe things have in fact got hardersince the restrictions ended – with 63% believing that the government hasn’t offered enough financial support, consultation or communication in the period since.

The impact of future restrictions

Furthermore, as Covid cases rise again in the UK, two in five (38%) small business owners are concerned about another lockdown and tighter restrictions, which would impact trade exponentially for a third consecutive year.

Two fifths (40%) say they are ‘not at all confident’ about their preparedness for a further lockdown or tightening of restrictions, and what’s more, a worrying 42% predict the temporary or permanent closure of their business should the UK enter another lockdown.

There is however, a glimmer of hope amongst nearly a quarter (23%) of SMEs who have strong faith in their ability to weather another lockdown.

Optimism for the future 

The study also revealed that 43% of owners are either ‘optimistic’ or ‘confident’ about the future of their business, while a quarter (25%) feel the challenges of Covid-19 have improved since restrictions ended earlier this year – pointing to more positive times ahead.

The last two years have also given owners the time, space or impetus to learn new skills (30%), adapt their business’s services or products (22%) and adopt new technologies (18%) – all of which should prove beneficial in the long run.

Alan Thomas, UK CEO at Simply Business, comments: “Two years on from the UK’s first national lockdown, the continued impact of Covid-19 on small businesses is clearer than ever. With owners losing almost £21,000 each on average, one in six believe they will never recover financially from the pandemic.

“For small businesses, there’s no doubt that it’s been a period of incredible difficulty. But it’s also been a period of resilience, innovation, and creativity, where the unique spirit of the UK’s self-employed community has once again been clear to see.

“Accounting for over 99% of all UK businesses and contributing trillions of pounds in turnover every year, small businesses sit at the heart of our communities and are vital to our economy. As the types of challenges facing small businesses evolve, it’s essential that we all play a role in supporting their revival over the coming months and years.

“From local bakeries and greengrocers to contractors and tradespeople, if the UK is to recover from the effects of the pandemic, we need small businesses to bounce back.”

Kirstie Myers owner of Goodfellows Barbershop in Luton: “My business has suffered massively. Loss of customers. A lot have taken to doing their hair themselves. They’re not going out or into offices to work so aren’t getting their haircut as often. I had to pay a lot of tax on the grants. I hadn’t earned enough money to pay the tax, so had to borrow from my family.”

For more information visit the Simply Business website