Government financial support for locked down firms covered just quarter of their costs, survey shows

West of England Firms have slammed government financial support for businesses forced to close during the most recent lockdown as grossly inadequate.

Some 54% of businesses that were shuttered during November – including restaurants, cafes and non-essential retailers – said the financial assistance covered less than a quarter of their overheads, a new survey shows. 

As a result, jobs were put at risk as businesses struggled to survive, according to Business West, the organisation that runs the Swindon & Wiltshire Initiative.

Comments posted by firms to accompany their responses to Business West’s quarterly survey show the frustration and anger at the government support.

While some firms were ordered by law to shut to obey lockdown measures, others closed as business dried up.

A food and drinks supplier wrote: “I have a small retail premises with an off sales license, I get no support, but due to the closure of hospitality my business has disappeared.”

An events business that operates across the region and whose sales plummeted 70% during lockdown added: “We have not been mandated to close, but we cannot do any business because the places we support have been mandated to close.

“Consequently, there is no support available for us.”

One publican chastised the government for reigning in support at a time when businesses needed it the most, writing “£1,334 of government grants will never cover any businesses fixed costs for one week, let alone a month. The grant covers maybe 10% of my fixed costs.”

The government’s last-minute decision to extend the furlough scheme also provoked fury, with a media business labelling the timing of the U-turn on the eve of lockdown “a disgrace”.

Highlighting the human and business costs of such a move, the business owner continued: “People have been made redundant based on following government guidance that was subsequently reversed. Companies have made choices they didn’t have to.”

Results of the survey, which ran between November 5 and 27 and attracted just under 500 responses from across the region, reveal a picture of waning business confidence as the coronavirus pandemic dragged on.

More than a third of businesses cut their investment in new plant, research & development, staff training and expansion into new commercial property in the three months to November.

Half reported a further decline in their cashflow from the previous quarter and a consequent increase in indebtedness during the last three months of the year, having already endured nine months of financial contraction due to Covid-19.

Turnover and profitability were also down while more than 70% of businesses said they were operating below capacity – indicative of a decrease in the competitiveness of the overall economy, and the capacity to bounce back in the long term.

Some 41% of businesses expect their profitability to drop over the course of the next 12 months, compared to 32% who expect an improvement.

The economic expectations of the UK economy for the next 12 months were negative for 60% of businesses, with only 15% confident. These numbers are in line with expectations last quarter.

Twice as many businesses had a negative outlook for the UK economy as a whole in Q4 2020 compared to the same period last year, largely driven by concerns about general economic conditions and general business uncertainty.

Business West managing director Phil Smith said: “A total of 497 businesses of all sizes and sectors across the region took this survey and the trends are clear – the second national lockdown has deepened the business community’s declining confidence in the economy overall and in their business performance.

“Weak demand and the general economic uncertainty present an extremely difficult environment for businesses to operate and prosper.

“Looking forward to 2021, businesses will look to government, both local and national, to deliver a more stable, predictable and commerce friendly environment to support economic recovery. Many businesses will be looking forward to the end of the year hoping 2021 brings a more hospitable outlook.”

Mr Smith criticised the less generous financial support available to firms that were closed or badly hit during the recent lockdown compared to earlier on in the pandemic.

“Government may think that these businesses are well catered for, but our polling shows that many are hurting badly,” he said.

“As mass vaccinations get underway, now is not the time to skimp on support for local businesses unable to operate normally. If we are a matter of months away from businesses being able to return to something approaching normality, why undo all the hard work now?

“While the extension of furlough until the end of March is welcomed, a few more months of comprehensive financial support for businesses hit hardest by the pandemic pales in comparison to the billions already spent by government this year.

“Clearly there is a need for government to balance its books and 2021 will undoubtedly see some tough choices being made. However, with an effective vaccine finally in our grasp, government needs to heed its own general message to the public and hang on in there just a little while longer and continue to support businesses into the spring.”

Below: Key indicators from Business West’s latest quarterly survey