Nine in 10 mid-sized firms in danger unless trade picks up
NINE in 10 British companies with revenue between £50m and £350m will only remain in business for the next nine months if trading does not improve, but there are signs of life for the beleaguered firms.
A survey of 500 medium-sized businesses conducted for advice firm
BDO found that firms had been forced to take out an additional £21m in debt on average to fund themselves through the Covid crisis, with one in 10 unlikely to be able to fully pay it back.
This high level of debt is a barometer of how long the impact of the crisis will last. About two thirds of businesses said the economy will take between one and three years to fully recover.
Despite the Government’s furlough scheme, nine in 10 businesses have had to make job cuts, while almost a third said they have reduced their workforce by almost a fifth in an attempt to cut costs. However, there were signs of optimism. A third of businesses surveyed said they had been largely unaffected by the coronavirusinspired economic slump.
Paul Eagland, managing partner at BDO, said the success of medium-sized companies would be key to Britain’s economic recovery.
Mr Eagland said almost a quarter of the companies surveyed had already shown “entrepreneurial spirit” by creating new products and services during the pandemic.
Brompton Bikes has improved its factory to enable social distancing and launched a new model that can be paid for with monthly instalments.
As the folding bike maker did not qualify for a government-backed loan it secured an overdraft facility as a precaution and placed some staff on furlough to conserve cash.
Lorne Vary, chief finance officer of Brompton Bikes, said Covid could increase interest in cycling as people stay away from public transport.
“For cycling, the virus outbreak could ultimately lead to a place like London having its Amsterdam moment.
“People and governments are ready to embrace a new way of getting around,” she said.
Brompton Bikes has improved its factory to cater for social distancing measures while launching a new model