UK firms feel squeeze as £133bn in invoices still unpaid

money-1760_640The full horror of the Covid-19 pandemic for UK businesses has been exposed amid claims that firms are owed a staggering £133bn for work done pre-lockdown, as invoices take longer to be settled, with half of those that applied for government-backed loans being declined.

According to MarketFinance, nine in tens firms are owed an average of £148,917 from March 2020, the vast majority of businesses (81%) are also expecting to wait longer to be paid for the goods they provide and work they do from now on.

Half anticipate waiting anywhere between 14-30 days beyond normal terms (45 days), while 15% reported they could be waiting anywhere between three and six months longer to be paid for work.

Only 43% of businesses that applied for funds under the Coronavirus Business Interruption Loan Scheme were successful in securing them. The typical loan taken by these businesses was £211,667, although they applied for almost double this amount.

However, as the lockdown has eased and shoppers return to the high street, almost half (45%) of businesses are optimistic that there is pent up demand for their products and services which they are eager to serve.

That said, most businesses only expect a conservative 10% increase in sales over the next three to four months. Opinion is polarised on prospects; a fifth (19%) anticipate a 25% to 50% increase in sales while one in six (15%) expect a decrease in sales of more than 75%.

Longer term, business owners have revised down their expectations of when they anticipate things to return to normal. In March, the majority (56%) felt business would normalise by September 2020. However, now the majority (57%) feel it could take as long up to years and are planning for this.

Most businesses (45%) anticipate only returning up to half of their furloughed staff to work in July and a quarter are likely to be kept on furlough as part of the extended scheme as the economic picture and business climate plays out. The future remains less certain for the remaining quarter of furloughed staff, who could well be made redundant.

Of those businesses that have a physical location (office, warehouse), over two thirds (68%) are negotiating rent/lease reductions with landlords, while a third have decided to leave their premises entirely because working from home has proven successful.

MarketFinance chief executive Anil Stocker said: “The reopening of the UK’s high streets marked the first buoyant moment for UK businesses in months but it might well be the calm before the storm.

“Businesses are facing a three-pronged assault on their finances. First up, it’s alarming that only half of their CBILS loans are being granted, then we learn that they have close to £150,000 in outstanding payments since lockdown began and now it’s likely that they will have to wait twice as long to get paid for new work they do, while demand and economic activity normalises.

“This coupled with a very moderate outlook for trading conditions, ‘rent quarter day’ this week and uncertainty about their workforce, no doubt this will put further pressure on businesses.”

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