How has COVID-19 affected SMEs?
Every level of the UK economy feels the negative effects when small and medium-sized enterprises (SMEs) are going through a crisis. As the bedrock of the system, their struggles echo through every sector, creating difficulty amongst all levels of business.
The COVID-19 pandemic hit SMEs hard, starving them of business and creating financial hardship that has proven extremely hard to recover from. In fact, experts postulated that a huge 168,000 SMEs would close as a result of the virus.
In hindsight, it’s extremely valuable to understand exactly what happened to SMEs during the pandemic, so we can help you take these lessons forward and look to a better future. COVID-19 affected SMEs in the following ways:
Simply, with little or no footfall or in-person presence, many SMEs were left with little profit. Many couldn’t compete with large retailers who already had a well-established online presence. This meant that many SMEs couldn’t shoulder their financial obligations and keep themselves afloat, forcing them to make huge cutbacks or close altogether.
Although the UK government introduced some measures to support small businesses, they were still hit hard by the restrictions, social distancing rules and extended periods of closure.
Difficulty with the supply chain
As the world shut down, it became much harder to get your hands on the things you needed for your business. Transport was severely affected, with trade essentially grinding to a halt, and the worldwide workforce was severely diminished due to illness and/or isolation periods. The costs of shipping shot up, and generally, everything was slowed down considerably.
With circumstances out of their hands, all business owners could do was wait - which built up a huge amount of financial stress.
In the future, SMEs might adopt a more flexible data-driven approach to supply and demand which could help mitigate future risk.
Closures due to lockdown or other factors
Whether it was government mandated restrictions or in an attempt to save money, many businesses had to shut their doors temporarily due to COVID. Naturally, this incurred a huge monetary loss to business owners worldwide.
Without a well established financial structure or substantial economic reseves, many were forced to close permanently.
In a bid to cut back on costs, many businesses were forced to let their staff go. Hundreds of thousands of workers lost their jobs as a result of the pandemic; which isn’t surprising when you hear that SMEs account for three-fifths of the UK’s employment.
In response, many businesses have been forced to restructure the way they run or completely reconsider their services.
COVID-19 brought around a ‘new normal’ of working from home and shopping online. Many businesses turned to the online world to keep going, and while there are many advantages to doing so, it takes time, effort and money to build an online system for your business that works for you.
Amount Of Loan Repayments Due To Covid
Some SMEs are now having to repay loans that they withdrew in an effort to help relieve the pressure of the pandemic. This can be extremely stressful, as even the minimum COVID-19 loan repayments can amount to more than an SME is able to afford.
Seeking a solution?
It goes without saying that SMEs have been put under a great deal of pressure over the last two years. Hopefully, the clouds are parting in 2022 and we’re stepping towards a brighter future. Many businesses are using this transition phase to consider the next steps of their company, improving their practices and growing as an organisation.
If you feel you need extra help, you’re not alone. Many SMEs are looking for loans to assist them with their positive growth now the world is opening up again. Whatever your situation, you must always seek advice from a trustworthy and experienced mortgage broker, like The Lending Channel.
Our team has specialist knowledge in all aspects of loans and finance, as well as close working relationships with many of the most reputable lenders on the market. We feel confident that we can find the right deal for you, helping your business move forward.
We’ll always consider your individual circumstances when advising you, and will be there every step of the way as you navigate the lending process.
Don’t hesitate to reach out for an initial consultation with one of our friendly team members today.