51,498 UK businesses were closed in March
This is an increase of 21,000 dissolutions compared to March 2019. The 70 per cent year-on-year increase was identified by the Enterprise Research Centre, a group of several leading universities.
The news that 21,000 more businesses closed in March should serve as a wakeup call to the Government to accelerate the roll out of government funded relief schemes. Whilst it can take months to dissolve a company, the news of the increase is likely to cause concern for thousands of businesses trying to stay afloat during these difficult times.
Currently just £1.1b has been lent to UK SMEs and on Thursday we will find out how that figure has increased over the last 7 days. UK Finance announced last Thursday that 28,461 applications had been received, with just over 6,000 applications being accepted.
If we look a bit deeper into the dissolution figures compiled by the Enterprise Research Group we see how this looks from a regional perspective. The graph shows that London had the biggest absolute increase in company dissolutions (+6,431, or nearly a third of the total) followed by the West Midlands (2,685), the North West (+2,440) and the South East (+2,357). Together they accounted for almost two-thirds (65%) of the 21,206 increase in company dissolutions when we compare March 2019 and March 2020. When looking at individual regions, the West Midlands and Wales experienced more than a 100% increase in dissolutions.
From a sector perspective, transport and the retail and wholesale sectors have been hit hardest in terms of percentage increase. Given the timing from when the coronavirus pandemic started affecting businesses in UK, one could argue that April may be far worse.
It's also worth noting that incorporations have also dropped in March compared with the same month the previous year
The evidence that the ERC has presented, whilst perhaps not directly correlated to COVID-19, could give an early indication of things to come. It's worth noting that the economy has been recovering from the effects of Brexit and it can take months to wind up or dissolve a company. It certainly appears there are sectors that are more heavily impacted, including the Transport and Storage, Professional, Scientific and Technical Activities and Wholesale and Retail sectors and firms less than 2 years old.
These findings highlight the imminent threat COVID-19 is having on our economy and UK businesses alike. It shows the fundamental importance of providing assistance to these companies and at the time of writing businesses are still struggling to access CBILS. The banks and the government are falling short.
The data shows that there has been higher levels of business closures and a concurrent lack of new businesses starting due to an understandable fear about what the future holds.
Whilst several schemes have helped businesses defer HMRC payments they do not go far enough and it is imperative UK businesses are given access to additional funding as a matter of priority. The coming weeks will be crucial to the survival of many UK businesses.