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Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 23/12/2020

Business confidence for 2021 will have taken a hit as more regions in England enter the highest level of restrictions due to the increasing number of cases and the new strain of Coronavirus found in the UK. This follows calls from local authorities, business groups and businesses themselves saying more support will be needed to help them through the loss of trade during Tier 4 restrictions.

The Government made a Local Restrictions Support Grant (LRSG) available during the November lockdown for those businesses having to close due to national restrictions. This grant provided either £1,334, £2,000 or £3,000 for each 28-day qualifying period based on their premises rateable value. It is not yet known if the Chancellor will announce a new grant for Tier 4 areas as more of England enters the strictest restrictions.

UK businesses confidence for 2021 subdued

At the beginning of this week the Lloyds Bank business barometer had shown business confidence at a nine-month high, following the start of the UK vaccination programme. The study showed businesses had become much more optimistic about next year with confidence increasing 17 points to minus four. This was the largest monthly increase for more than four years and came after the November lockdown was ending.

Business confidence has crashed since the pandemic started and the first national lockdown was announced in March 2020. It has since remained below the long-term average rates.

Businesses also had the potential disruption of the UK leaving the EU, but Hann-Ju Ho, senior economist at Lloyds Bank suggests the news of vaccination has counteracted this:

“The news of the vaccine progress has bolstered this month’s confidence figures, more than offsetting uncertainties around the UK’s new trading relationship with the EU.”

Those businesses showing improvements in confidence included manufacturing, construction and services.

Small business confidence is hit

A survey of small business owners had shown at least one third of small business owners are concerned their business would close in 2021. The survey conducted by Coronavirus Business Interruption Loans Scheme (CBILS) lender iwoca also found that confidence was most severely dented for female business owners, of which 47% had concerns they may need to close in 2021.

The survey also found just under a quarter of small business owners would not be buying Christmas gifts this year and for those with children a third would not be buying presents at the same level as before the pandemic.

Daiga Ozolniece, owner of Birmingham based beauty salon, Adelaine Beauty Ltd voiced her concerns: “We don't know how we’re going to survive. It’s very possible we’ll have to close down in January. It all depends on the Christmas period. My family will spend this Christmas without me. I’ll be sitting in my salon until the last minute, waiting for clients. I’ll work on Christmas Day, Boxing Day – every day. Every penny counts. There are no presents this year - none at all. We’re barely coping with the bills.”

Seema Desai, Chief Operating Officer of iwoca added: “Christmas itself will of course be different for all of us, but it’s even more concerning that so many business owners are worried that they may not have a business to go back to in 2021. Christmas won't be an easy time for many business owners this year as they juggle to keep their businesses afloat whilst some will try to spend quality time with their families or loved ones.”

Business loans in 2021

Businesses that need finance to help improve their cashflow due to the COvid-19 restrictions or find their business impacted by the pandemic may qualify for a government backed loan. The Government recently announced the CBILS and Bounce Back Loans schemes would remain open until end March 2021.

Bounce back loans are 100% government backed and businesses can borrow between £2,000 up to £50,000 or a maximum 25% of turnover. There is 12-months interest free credit and no payments required during this period. After this the interest rate is 2.5% and payments must be paid. Businesses that have already applied for a Bounce Back Loan may top this up but must apply before 31 January 2021.

Coronavirus Business Interruption Loan Scheme – these are larger loans of between £50,000 and £5 million or up to 25% of 2019 turnover. They are Government backed but only to 80% so the lender may have some minimum requirements, such as turnover of at least £100,000 or for loans above £250,000 a personal guarantee may be required. Personal guarantees exclude a business owner or director’s main residence and it is capped to a maximum of 20% of the outstanding debt.
Find out more about eligibility for CBILS or speak to our preferred CBILS loans broker.

Business can also access CBILS as an invoice finance variant, these still come with 12-months interest free credit and the Government also pays for any associated fees. The invoice finance lender gives the business a loan against the value of its outstanding invoices. This allows the business to receive payment immediately while the invoice finance lender chases the payments. Some lenders will give as much as 95% of the invoice value.
Find out more about how invoice finance works or speak to our preferred invoice finance broker.

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