SMEs learn to adapt as pandemic lockdown slashes income

SME businesses in Cornwall have lost a third of their earnings since the beginning of the pandemic lockdown, new research has shown.

A study released by specialist business bank Aldermore showed a dramatic loss of trade for smaller enterprises.

But the research also showed that despite a tougher than ever trading environment, almost 40% of small- and medium-sized businesses have managed to adapt and fight back in some way.

The study on the impact of the coronavirus on businesses shows one in four (25%) SMEs have seen a decrease of more than 70% of income.

The hardest hit businesses have been those in the hospitality and leisure industry with an average loss of 53% of their revenues followed closely by the food and drink industry with an average loss of 49% of their takings.

One in 10 firms said that they fear long lasting economic damage if conditions do not return to normal within the next five months.

The majority of SMEs (72%) have taken steps to reduce costs as part of their Covid-19 response plan with strategies including decreasing operating costs and discretionary spending (31%), furloughing staff (29%) and drawing on capital (17%).

One in 10 (11%) SMEs have also reported applying to the Coronavirus Business Interruption Loan Scheme (CBILS).

In addition to cutting costs, 67% of SMEs have also looked at ways to increase income. Some of the most pivotal ways that small businesses have done this include shifting more business online (17%) and investing in new technology to operate remotely (15%).

Small business owners facing significant losses in income, many are now adapting their businesses in order to survive.

Two out of five (39%) SMEs for example, have adjusted their business plans to reflect the ‘new normal’ due to Covid-19 and 7% of UK SMEs have pivoted to an entirely new market in an effort to drive business.

Not all is doom and gloom for businesses at this difficult time with about 8% of businesses saying they anticipate to see an increase in business revenue as a result of the coronavirus pandemic.

Tim Boag, group managing director, business finance at Aldermore, said: “Businesses are having to survive in an environment which has never been more challenging or uncertain.

“The situation is continuously changing, and many SME business owners are having to swiftly adapt by finding ways to diversify their products and services, as well as cutting costs, managing supply chain arrangements, and furloughing staff in order to survive.”