The Corporate Finance Network has undertaken research amongst 13,000 small and medium sized enterprises (SME’s) which predicts that in the next 4 weeks, as a result of the COVID-19 lockdown, 18% of all SMEs will not be able to survive, despite the support measures currently announced by the Government.
If the lockdown lasts 3 months or more, the situation looks even more dire with accountants in the network reporting that 31% will have to close down their business by June.
This research predicts that almost four million people will lose their jobs in the next few weeks and in an attempt to stop this happening, The Corporate Finance Network has put together a ready-made solution for the UK Government to adopt, based on a “Rescue and Recovery” incentive for successful SMEs. This would be asking the more robust small businesses to ‘buy’ the ‘at risk’ businesses in their sector, with a view to retaining the employees and maintaining the trade and turning it around once the lockdown is over.
Kirsty McGregor, founder of The Corporate Finance Network says: “We are asking the Treasury to fully consider our proposal, with them underpinning it with grants for supporting employment – possibly distributed via the 38 Local Enterprise Partnerships (LEP Network) and the equivalent in Scotland, Wales and Northern Ireland. In addition, it would require a series of tax reliefs for Corporation Tax and longer term Capital Gains Tax which represents a return for the risk the Government is asking companies to take when merging with a failing business.
“We have some excellent entrepreneurial business owners in the UK, but they are not usually motivated – or indeed accustomed – to make acquisitions, often perceiving such deals as high-risk, and complicated. Historically, over the last three years in the UK, there has been just over 4,500 acquisitions by SMEs; to save a significant percentage of the UKs economy and keeping almost 4 million people in jobs, we need to encourage and facilitate 250,000 deals within the next few weeks. We can absolutely do this by incentivising them, supporting them, and with the full backing and incentive of the UK Government".