Hundreds of businesses in city at risk, study reveals
PLYMOUTH is in danger of losing nearly 500 businesses due to the coronavirus lockdown which would put about 5,000 people out of work, new research shows.
A study by Professor Marc Cowling, of the University of Derby, and Professor Ross Brown, from the University of St. Andrews, reveals that 496 businesses in Plymouth are at immediate risk of failing as they run out of cash.
The academics, who have been studying the impact of the Covid-19 lockdown on the 100 largest cities and towns in the UK, said this scale of business failures would put 4,949 Plymouth workers into unemployment with little chance of finding a new job.
New figures show that from Plymouth’s 27,160 Universal Credit claimants,11,197 are active job-hunters, up 100% from 5,598 in 2019.
Prof Cowling said: “The immediate consequences of the Covid-19 crisis on the economies of our cities and towns will be extremely severe at a time when people are already struggling to make ends meet and pay their bills.”
And Prof Brown added: “Whilst the predicted job losses are spread widely across the UK, it is very apparent that the cities and towns outside of the wealthy South East of England will suffer more from business failure. This fact alone means that the levellingup agenda just got a lot harder.”
The two academics, along with Augusto Rocha, a research fellow also from the University of St Andrews, have been researching the financial strength of small and mid-sized businesses.
In a recent piece published in the International
Small Business Journal, the three looked at how much cash SMEs had squirrelled away and, therefore, how likely they were to survive an event such as the pandemic.
“We find that only 39% of the businesses were bolstering their cash balances leading up to Covid-19 which suggests that 61% of businesses may run out of cash, including 8.6% that had no retained earnings whatsoever with micro firms at particular risk,” they wrote. “The importance of precautionary saving for SMEs is critical to enhance resilience.”
The academics said that around the globe the common public policy response has been to enforce the temporary closure of non-essential businesses.
In some countries, such as the UK with its Coronavirus Job Retention Scheme, governments have underwritten a proportion of the wage income for staff forced to furlough or broadened their welfare systems to accommodate newly laid-off workers or small business owners. But they wrote: “While these actions are helpful, they do not explicitly address the lack of sales trading activity on business income and cash balances.”