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Counting the cost of Covid for SMEs

There’s been no shortage of commentary on the profound impact Covid-19 has had on small business. Politicians, economists, business leaders and journalists have repeatedly emphasised the challenge SMEs are facing. Over the last several weeks we’ve seen some transform their operating models to survive, while others have bridged the gap with funding from schemes like CBILS and BBLS. We’ve also seen many simply go out of business.

All of which has gone some way to illustrating the scale of the challenge, but to understand what’s changing for SMEs we need to dig into the numbers. Both at an aggregate level, but also with a granularity that shows which areas of the country, which industries and which types of business have seen the biggest change in fortunes. After all, 99% of companies in the UK are SMEs, spanning every town, city and region.

To help shine a light on the impact, we’ve used the DueDil Business Information Graph™ which maps connections between companies, shareholders and directors, to draw out insights on how the SME economy has changed in March and April.

UK company liquidations in March and April 2020

Unsurprisingly there’s been an increase in companies going into liquidation or administration since the start of March. An average year-on-year increase of 28% in March and 72% in April. The numbers fluctuate week-to-week depending on where particular bank holidays fell, but across the month the trends become clearer.

UK company liquidations by turnover

Breaking down the number of companies in liquidation or administration since the start of March 2020, we can see that nearly all of them fall into the sub £45m turnover bracket. Typically, a turnover of under £45m defines a company as an SME, showing how many small and medium companies have used insolvency measures since March.

UK company liquidations by region

Although London has the highest number of companies in liquidation or administration, we can see there is actually quite an even spread across the whole of the UK. However, different regions have different volumes of companies. For example, there are twice as many active companies in the South East as the North West, and yet their respective liquidation and administration numbers (896 vs. 986) are relatively even.

UK company liquidations by industry

We’ve used DueDil’s Industry Keywords to look at which sectors the 7000+ companies are in. Industries that depend on physical goods like food, real estate, retail, manufacturing and construction make up a large proportion. Consulting, which encompasses a wide array of sectors makes up nearly half of all the companies going into liquidation or administration.

How company insights can help the SME economy recover

Increasingly the government and financial institutions will need to start building a more granular picture of SMEs across the country if those businesses are to get the help and services they need. Rebuilding the economy during and after Covid-19 will require a targeted approach that goes beyond ‘supporting small business’ and gets into the detail of which regions, industries and specific companies need help.

This type of scalable analysis is now possible thanks to the use of machine learning, APIs and digital data trails left by SMEs. In the same way that organisations can create tailored, customised experiences for individual consumers, they can now do the same for individual businesses. This will not only help the SME economy prosper, but also make the economy more resilient in the face of future crises.

Through the insights above we’ve provided snapshots of how the SME economy has changed so far in 2020. For a real-time view you can check out DueDil’s Impact Barometer which provides regular updates and context on SMEs during Covid-19 and beyond.

Author

  • Editorial Director of the The Fintech Times

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