Small businesses face a £22,000 average cost to reopen in full after lockdown – leading one in five entrepreneurs to raid their savings
- Nucleus Commercial Finance says last few months were turbulent for SMEs
- Over one in five SME owners have used their own savings to cover costs
- Implementing health and safety measures is the biggest costs for SMEs
- Staff salaries are second biggest cost but could increase when furlough ends
Small and medium-sized businesses face a further financial setback from lockdown with an average £22,000 cost to reopen in full.
Meanwhile, the cost has proved to be personal for many as well as professional, with one in five (21 per cent) using their own savings to cover costs, instead of turning to business loans or grants to finance their reopening.
Research by Nucleus Commercial Finance found that SME owners that had to shut their business due to lockdown restrictions are now spending, on average, £21,830 to fully reopen.
Small businesses are struggling with £22,000 in reopening costs and £250,000 losses according to Nucleus Commercial Finance
Nucleus Commercial Finance, one of the accredited CBILS (coronavirus business interruption loan scheme) providers, said that SMEs are also suffering average losses of £251,471.
Chirag Shah, CEO of Nucleus Commercial Finance, said: ‘The last few months have been a turbulent time for businesses both large and small across the country.
Chirag Shah, CEO of Nucleus Commercial Finance, says things have been tough for businesses
‘Not only has the loss of income been devastating for many SMEs, but those businesses that are able to reopen in some capacity now face significant costs to ensure they can operate safely, putting a further strain on business finances.’
Many businesses have had to open with new health and safety measures in place and these have been the biggest cost – accounting for 44 per cent.
Staff salaries account for 33 per cent of costs and will increase in October when the furlough scheme draws to an end.
Reconfiguring the layout of office space to ensure staff are sufficiently able to meet social distancing requirements came in as the third biggest cost and accounted for 26 per cent of expenditure.
|Type of cost||Proportion of costs|
|Implementing new health and safety measures, e.g. screens||44%|
|Reconfiguring the layout of space||26%|
|Investing in new tech, e.g. apps, booking services, etc.||22%|
|New contactless payment systems||14%|
|Source: Nucleus Commercial Finance, correct as at 17 August, 2020|
This latest survey is in stark contrast to one by the firm a year ago, where businesses revealed their ambitious plans for growth over the summer months.
In 2019, it found that two fifths of SMEs expected an increase in income over the summer period, while a fifth wanted to ramp up their borrowing to expand their business over the summer months.
Last week the Federation of Small Businesses said small business are calling for an option of furlough extension.
It highlighted the Office for National Statistics’ recent figures, which show that there are an estimated 730,000 fewer employees on payrolls compared to March 2020 and that the self-employed community has shrunk by a record 238,000 between the first and second quarter of this year.
FSB chairman Mike Cherry said: ‘The annual cost of running a small business has risen by at least £60,000 since 2011, an increase largely driven by surging employment costs.
‘As we look to the autumn, the Chancellor should prioritise bringing the upfront costs of employment down, starting with Employer National Insurance Contributions.
‘An employer NICs holiday for small business owners who employ those furthest from the labour market would also mark an important step forward.’
Small Business Essentials