Corporate Finance Network: British Small and Medium Enterprises Running Out Of Cash, Could Succumb to Permanent Shutdown

In a study conducted by the Corporate Finance Network of accountants in the United Kingdom it has been found that as much as a fifth of small and medium business owners across the country are at the risk of running out of cash within a month despite the several assurances being made and stimulus packages being announced by chancellor Rishi Sunak. The research explained that around 800,000 and a million companies in the UK will be shutting down permanently, leaving millions of people unemployed. The accountants believe that the problem it seems is with the attitude of the banks that do not makes enough efforts to reflect the sentiments of the chancellor and are not coming to the aid of these businesses for whom the time is running short.

While the British government promptly acted, taking note of the deteriorating situation in the country, the banks have yet not accelerated their execution process. As per the research report, businesses looking for emergency loans are being told that funds will take weeks to come when the announcements made by the government has already passed two weeks. Some people are complaining that banks are now not even picking up calls and when they do, they are advised that their businesses are not eligible to receive the emergency loans. But then the question is who drew the benchmark and how was the benchmark drawn as to which business is eligible and which is not. Chancellor Sunak in his statement had said that any good business requiring assistance to pay for its dues, pay for salaries and pay for stocks will be able to receive emergency funds at attractive terms with a government backing. But a prompt action from the bank to carry forward the governments’ initiatives in this regard seem to go a long way in instilling confidence among these businesses.

Several in the banking industry are being pointed out, however, it is unfair to say that banks have a bad attitude, but the circumstances are such that their functions have become slow, a report read. The pandemic breakout has brought the operations in the industry to a grinding slow, which has made it difficult for the government-backed loans and grants to find its way to the intended beneficiaries.

Due to a nationwide lockdown, most of the banking sector employees are operating from remote location which in turn is impacting their productivity levels. The officials explained that to implement the governments directives the banks need to recalibrate their policies by taking in the government announcements, but with majority of its senior staff working remotely it is challenging to accomplish. Under the circumstances being overwhelmed from all sides with so few manhours at disposal, there is bound to be a chaos in the industry. The banking system is already burdened with so many of its loans at the risk of going bad that they now have to trend carefully as they also need to protect themselves in this hour of crisis.

Ever since the arrival of the pandemic small and mid-tier business like pubs, restaurants and other high cash transactions’ businesses have been at the receiving end of the business loss. Most of these businesses rotate their provisions on a daily basis and many of their staffs are temporary workers who work on daily or weekly wages. When the pandemic hit the country, streets started to get deserted which was followed by government orders asking people to stay indoors. In the current situation, social gatherings are considered life-threatening, hence the cash counters of the above businesses are running dry with the temporary shut downs implemented across the nation. Though lack of business meant that the provisions were unspent but there were still payments like salaries and rents electricity that need to be paid which is currently eating into the reserves of these businesses.

The report explained that governments assurance to pay a part of the employee salary seems to have been stuck in a bureaucratic labyrinth while no actual support is coming from anywhere for covering the expenses. Time for these business looks very crucial as unlike large corporates these businesses do not have deep pockets; and in the event of financial aid not reaching them on time, they could soon collapse.

Chancellor Sunak though had warned that despite the overwhelming government support it will not be possible to save every business and some are bound to fall to this pandemic. The numbers, however, can still be reduced if the banking sector of the country gets back to its full functionality levels at the earliest and starts implementing the stimulus package. Business associates stated that should the government’s stimulus package not be disbursed within the next couple of months its utility could very well be lost.

As has been pointed out by several experts the biggest challenge posed by this pandemic is that of logistics. The situation is indeed unprecedented like had not been seen in United Kingdom since the World War II. Given the prevailing scenario, accountants believe that the banking industry and the government need to work at optimum capacity levels, otherwise, the schemes launched by the Chancellor last month would lose its rationale.

The National Health Service (NHS) is currently at the forefront of the country’s fight against the pandemic. Many former NHS employees have joined the team in this crucial time while diverse sector businesses are also coming forward to offer support through the production of machinery parts, ventilators, sanitisers or other medical equipment. However, still there is no certainty when things will get back to normal. The Prime Minister Boris Johnson has now also been infected and there is a high chance that the whole civil machinery of the state might slow down if a greater number of people in the government test positive. Since the beginning of the pandemic, no big companies have turned to file for bankruptcy, but the market predicts that the situation could change very soon.

Globally also the situation has been deteriorating at a rapid pace. The worst affected regions in Italy, Spain and France were once tourist hotspots, but now the streets and local businesses out there are deserted and are on the brink of closure, which earlier used to bring in massive revenues and employment to the region. Though the local governments have been trying their best to support these businesses, all eyes are on the pandemic on how soon remission in its spread would take place. Till now the coronavirus has infected more than 750,000 lives worldwide in more than 200 countries.

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