Small business growth – can it still happen during a global pandemic?
Economic uncertainty is going to be with us for a while. COVID-19 has damaged the global economy and in the UK businesses are suffering. Is it possible for small business growth to happen under these circumstances?
My experience of the small business sector leads me towards ‘yes’. I think that SMEs, small and micro-businesses will have a major role in the UK’s economic recovery. With the right kind of support from innovate start-ups and fintech businesses, there is a strong likelihood for small business growth even during a global pandemic.
Can we really expect to see small business growth during a pandemic?
A few months into the pandemic, the world is still in the process of understanding what the ‘new normal’ looks like. But even during the height of the pandemic in the UK, there were encouraging signs.
For example, in July 2020 company formations in the UK reached more than 80,000 per month. This is a record high. Some of the businesses launching right now are taking advantage of opportunities that have been created by the pandemic. Others are likely to be by people who are relaunching businesses after struggling earlier in the year. Others will be by people who are anticipating potential redundancies following the end of the Government’s furlough scheme.
These redundancies are now being announced in a relatively steady stream from big companies such as British Airways and Marks & Spencer. The latter has announced 7,000 redundancies and has traditionally been seen as a good barometer of the UK economy. But redundancies will continue across companies of all sizes.
Research from the Chartered Institute of Personnel Development (CIPD) along with recruitment consultancy Adecco shows that 38% of private sector companies plan to make redundancies in the autumn. The figures also show that 16% of companies within the public sector are also planning to make people redundant due to the pandemic.
Large companies are making redundancies
It’s not surprising to see these redundancies as data shows that the pandemic has wiped more than 25% off the economic output from the UK. However, of those surveyed, almost half said they planned to hire people between July and September 2020. This points towards the return of some confidence in the small business sector. However, this is still much lower than the average figures from previous years.
As the Government’s furlough scheme slowly winds down, we are likely to see more redundancies across bigger brands. But as small businesses are the backbone of the UK’s economy and are responsible for the provision of 95% of private sector jobs, I think it’s likely they will pick up the slack. As larger businesses shed staff, new companies will form and take them on.
In this way, the small business sector will continue to prop up the economy through this difficult economic time. However, many will need to work with fintechs and start-ups to be able to provide the kind of flexibility that is now essential. There is already a sector within UK fintech that solely works on lending to businesses that are too new or too small for the big banks.
Thanks to the UK Government’s efforts over the last decade to allow this kind of competition within the financial sector, it is possible for innovative start-ups to genuinely challenge bigger companies. However, during the pandemic small businesses have found themselves herded back into the fold of bigger banks due to the Government’s financial rescue scheme. For example, Business Bounce Back Loan schemes were mostly provided by the big traditional banks.
Strong link between technology and small business success
There must now be a renewed focus on levelling this competitive field and allowing small businesses to widen their access to financial services. Small and medium-sized businesses must have access to the kind of bespoke specialist financial services they need, whether this is a simple automated tracking system, full payroll integration using an app or flexible credit.
The competition between fintechs and big banks has already gone some way to forcing the major financial institutions to be more competitive. They now offer lower fees than they traditionally would, but there is much further to go to ensure small businesses have every opportunity made available to them to succeed through this crisis.
Technology is vital for small businesses to offer the kinds of services that are flexible, accessible, and fast enough to work for consumers during these difficult times.