UK businesses enter new lockdown with dwindling cashflows

Bloomberg

UK businesses were suffering even before the latest lockdown, leaving many in a precarious position as they enter new restrictions with what many say is insufficient government support, a survey showed.
The findings from the British Chambers of Commerce in November add to pressure on Chancellor of the Exchequer Rishi Sunak to extend aid to companies beyond the $12,000 one-time grants he offered on January 4. With non-essential shops and hospitality venues facing the prospects of weeks of closures after an already dismal 2020, a growing number of businesses are headed for a financial abyss.
“Economic activity was strikingly downbeat in the final quarter of 2020,” said Suren Thiru, head of economics at the BCC. “A new national lockdown means that a significant double-dip recession in the first quarter of this year is looking increasingly likely.”
Four in ten companies said their cash flow deteriorated in the fourth quarter, according to a survey of 6,203 businesses conducted by the lobby group. Almost 80% of hospitality firms reported a drop in sales in the period.
Prime Minister Boris Johnson’s government is counting on a mass vaccination program taking root by Easter to allow an easing of the restrictions. The latest measures to support companies add to the 280 billion pounds it has cost the Treasury to tackle the virus and bolster firms and workers through the pandemic.
Sunak has said that level of spending — and borrowing — isn’t sustainable, drawing the ire of economists who warn failing to spend enough now will damage a slow recovery that’s already seen lasting beyond next year. Earlier this week, Sunak said he’d use his budget in March to for longer-term stimulation for the economy.
Kate Nicholls, chief executive officer of the UK Hospitality group, said Sunak’s aid represents “only a sticking plaster for immediate ills.” Mike Cherry, chair of the Federation of Small Businesses, said for many, the grants “won’t be enough for businesses who are already under the cost and on the brink.”