A record number of small business owners are planning to close their companies over the next twelve months, according to the latest Small Business Index (SBI) from the Federation of Small Businesses (FSB), putting the UK on course to lose more than a quarter of a million businesses.

In a survey of 1,400 companies, just under 5% said they expect to close this year; this figure is more than double that recorded at the same point 12 months ago, and doesn’t reflect the threat of closure faced by those hoping to survive despite having frozen their operations, reduced headcounts or taken on significant debt, explained the FSB.   

The UK SBI confidence measure stands at -49.3, down 27 points year-on-year — the reading is the second-lowest in SBI history, second only to that recorded in March 2020.

The vast majority of those surveyed (80%) don’t expect their performance to improve over the next three months, and the proportion of small businesses forecasting a reduction in profitability for the coming quarter has risen from 38% to 58% in the past year, which is an all-time high.

Close to a quarter (23%) of small firms have decreased the number of people they employ over the last quarter, up from 13% at the beginning of last year, and one in seven (14%) said they’ll be forced to cut numbers over the next three months.

Almost half (49%) of exporters also expect international sales to drop this quarter, up from 33% at this time last year.  

Mike Cherry, national chairman of the FSB, commented: “The development of business support measures has not kept pace with intensifying restrictions. As a result, we risk losing hundreds of thousands of great, ultimately viable small businesses this year, at huge cost to local communities and individual livelihoods.

“A record number say they plan to close over the next 12 months, and they were saying that even before news of the latest lockdown came through.  

“At the outset of the first national lockdown, the UK government was bold. The support mechanisms put in place weren’t perfect, but they were an exceptionally good starting point. That’s why it’s so disappointing that it’s met this second lockdown with a whimper.  

“There are meaningful lifelines for retail, leisure and hospitality businesses, which are very welcome as far as they go, but this government needs to realise that the small business community is much bigger than these three sectors.

“Company directors, the newly self-employed, those in supply chains, and those without commercial premises are still being left out in the cold. We’ve published a five-point plan to address gaps in the support landscape, and we look forward to the treasury embracing — action in March will be too late to stem closures.

“We also have to look again at how we treat emergency debt facilities over the coming months. Many of those who have borrowed significantly have done so in order to innovate. It would be a shame to lose the top businesses of tomorrow because of a failure to extend grace periods today.   

“All the while our exporters are trying to get across what a new EU-UK trade agreement means for them without the cash they need to make adjustments. Direct funding to help them manage new obligations in the form of transition vouchers is urgently needed.

“This government can stem losses and protect the businesses of the future, but only if it acts now.”