Cash timebomb: UK businesses ‘cannot wait weeks’ for financial aid

A majority of British businesses are facing a cash shortfall in the coming months, prompting fears the continued coronavirus lockdown could lead to mass insolvencies.

A survey of around 600 British businesses found 62% had no more than three months of cash left to cover running costs, with companies across the country suffering from a sharp and significant fall in domestic and overseas sales as lockdown measures bring many firms close to collapse.

A third of firms surveyed by the British Chamber of Commerce (BCC) were set to furlough at least 75% of their workforces, which would see the government pay 80% of employee salaries to avoid businesses making staff redundant.

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Yet “despite the government’s efforts to cushion the economic blow and the Bank of England lowering interest rates to provide cheap financing”, The Guardian reports, “almost one million small businesses across Britain are feared to be at risk of collapsing within the next month as they struggle to secure emergency cash”.

“The coronavirus pandemic has taken a heavy toll on business and economic activity across the UK,” said BCC director general Adam Marshall. “The majority of firms cannot wait weeks or months for help to arrive. There’s no escaping the scale of the challenge UK businesses are facing.”

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The BBC adds that seperate research, carried out by the Corporate Finance Network, found that nearly a fifth of all small and medium-sized businesses in the UK are unlikely to get the cash they need to survive the next four weeks.

In a bid to help firms survive the lockdown, the Chancellor Rishi Sunak said that businesses would be able to apply directly to their local bank for Coronavirus Business Interruption Loans (CBILs) of up to £5m.

The chancellor pledged that “any good business in financial difficulty who needs access to cash to pay their rent, the salaries of their employees, pay suppliers, or purchase stock, will be able to access a government-backed loan, on attractive terms”.

However, the BBC reports that “thousands of struggling firms can’t get through to their banks by phone or, when they do, are being told by the banks they're not eligible”.

Banks have come under heavy fire amid claims of unfair lending tactics under the scheme, with the Daily Mirror reporting that “some are said to have demanded personal guarantees from business owners while others try to apply high interest rates once the interest rate-free first year is over”.

City A.M. says Sunak is now reportedly set to overhaul the loans scheme after talks with lenders, with Sky News adding the reformed scheme would offer loans as interest-free and charge-free for the first year as long as companies can prove their businesses are viable and they can pay back the loan.