The latest survey of UK accountants representing approximately 6,000 SME clients shows 28 per cent of them will probably not have enough funding for the next six months and expect to be unable to access the necessary funds for future trading. A further 24 per cent still do not know if existing funding will be sufficient.
Just three per cent of the SMEs that do not have the funds to survive six more months believe they’ll be able to access it, suggesting that many have exhausted the finance options available to them.
The findings from the ACCA UK (the Association of Chartered Certified Accountants) and The Corporate Finance Network (CFN) reveals SMEs and their accountancy practitioners are looking ahead to an uncertain Q1 of 2021, with 56 per cent of SME clients already having accessed additional debt funding – such as CBILs and Bounce Back Loans – during the pandemic.
This uncertainty around access to cash is likely to coincide in the coming months with looming financial pressures that will compound SME concerns. SMEs struggling to access cash will also face the end of existing schemes and the introduction of new measures including:
- BBL, CBILS and CLBILS – businesses have until end of March to apply
- Deferred VAT to be paid on or before 31 March – online applications can be made for again over 11 months
- Insolvency – the moratorium on winding-up petitions and statutory demands, and commercial eviction ban all end 31 March
- IR35 – off-payroll working rules (IR35) start 6 April which will likely dampen the contract market as businesses contracting out work will be responsible for determining the status of contractors. End clients may not have certainty about their determinations and whether a contractor has employee status to be safe.
- Furlough scheme – closes at the end of April, with businesses having until the end of March to apply
- Business rates – reintroduced in April 2021
- The Minimum Income Floor (MIF) for self-employed Universal Credit claimants will be brought in again from 1 May
- Wage costs will increase from 6 April with National Minimum Wage rates rising around two per cent, plus National Living Wage increases by 2.2 per cent and the threshold to pay NLW also reduces from employees aged 25 or older to aged 23 or older.
Claire Bennison, head of ACCA UK, explains: ‘These developments will be an added pressure for SMEs and their accountants, alongside difficulties on the availability of products due to uncertain supply chains as a result of Brexit. We’ll continue to ensure SMEs are aware of such changes, and also continue campaigning for support such as the Director Income Support Scheme (DISS) for those that have slipped through the cracks.’
Kirsty McGregor, founder of The Corporate Finance Network, adds: ‘The first quarter of 2021 will be challenging for SMEs. Our Tracker reveals time and again that SMEs are facing down the issues but the situation is not sustainable. The challenge for the government as it prepares the March 2021 Budget is how it can alleviate these pressures and offer SMEs the lifeline they need.’
With the FSB, Forgotten Ltd and Rebecca Seeley Harris of Re Legal Consulting Ltd, former Senior Advisor to the Office of Tax Simplification (OTS), ACCA UK has written to the Treasury to press for a Director’s Income Support Scheme, and has met with the Treasury to discuss this. An outcome is anticipated.
