SMEs face a tough start to 2021 as financial pressures build toward the end of Q1

The latest survey of UK accountants representing approximately 6,000 SME clients shows 28 per cent of them will probably not have enough funding for the next six months and expect to be unable to access the necessary funds for future trading. A further 24 per cent still do not know if existing funding will be sufficient.

Just three per cent of the SMEs that do not have the funds to survive six more months believe they’ll be able to access it, suggesting that many have exhausted the finance options available to them.

The findings from the ACCA UK (the Association of Chartered Certified Accountants) and The Corporate Finance Network (CFN) reveals SMEs and their accountancy practitioners are looking ahead to an uncertain Q1 of 2021, with 56 per cent of SME clients already having accessed additional debt funding - such as CBILs and Bounce Back Loans - during the pandemic.

This uncertainty around access to cash is likely to coincide in the coming months with looming financial pressures that will compound SME concerns. SMEs struggling to access cash will also face the end of existing schemes and the introduction of new measures including:

  • BBL, CBILS and CLBILS – businesses have until end of March to apply
  • Deferred VAT to be paid on or before 31 March – online applications can be made for again over 11 months
  • Insolvency – the moratorium on winding-up petitions and statutory demands, and commercial eviction ban all end 31 March
  • IR35 – off-payroll working rules (IR35) start 6 April which will likely dampen the contract market as businesses contracting out work will be responsible for determining the status of contractors. End clients may not have certainty about their determinations and whether a contractor has employee status to be safe
  • Furlough scheme – closes at the end of April, with businesses having until the end of March to apply
  • Business rates – reintroduced in April 2021
  • The Minimum Income Floor (MIF) for self-employed Universal Credit claimants will be brought in again from 1 May
  • Wage costs will increase from 6 April with National Minimum Wage rates rising around two per cent, plus National Living Wage increases by 2.2 per cent and the threshold to pay NLW also reduces from employees aged 25 or older to aged 23 or older.

Claire Bennison, head of ACCA UK, explains: ‘These developments will be an added pressure for SMEs and their accountants, alongside difficulties on the availability of products due to uncertain supply chains as a result of Brexit. We’ll continue to ensure SMEs are aware of such changes, and also continue campaigning for support such as the Director Income Support Scheme (DISS) for those that have slipped through the cracks.’

Kirsty McGregor, founder of The Corporate Finance Network, adds: ‘The first quarter of 2021 will be challenging for SMEs. Our Tracker reveals time and again that SMEs are facing down the issues but the situation is not sustainable. The challenge for the government as it prepares the March 2021 Budget is how it can alleviate these pressures and offer SMEs the lifeline they need.’

With the FSB, Forgotten Ltd and Rebecca Seeley Harris of Re Legal Consulting Ltd, former Senior Advisor to the Office of Tax Simplification (OTS), ACCA UK has written to the Treasury to press for a Director’s Income Support Scheme, and has met with the Treasury to discuss this. An outcome is anticipated.

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For media enquiries, contact:

Michael Jarvis,
Michael.jarvis2@accaglobal.com
+ 44 (0) 7538 258897
Twitter: @ACCANews

Notes to Editors

About the ACCA UK and The CFN SME Recovery Tracker: 
This edition has sought views from accountants working in practices advising some 6,000 SME clients. The data for this poll closed on 19 January 2021.

About SMEs: SMEs, (typically less than 250 employees), account for 99.9% of the private sector employment in the UK and there are 22 million employees working for these private sector businesses.

About ACCA: ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants, offering business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.

ACCA supports its 219,000 members and 527,000 students (including affiliates) in 179 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. ACCA works through a network of 110 offices and centres and 7,571 Approved Employers worldwide, and 328 approved learning providers who provide high standards of learning and development.

Through its public interest remit, ACCA promotes appropriate regulation of accounting and conducts relevant research to ensure accountancy continues to grow in reputation and influence.

ACCA has introduced major innovations to its flagship qualification to ensure its members and future members continue to be the most valued, up to date and sought-after accountancy professionals globally.

Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability.

About The Corporate Finance Network: The Corporate Finance Network – www.thecfn.org.uk - The Corporate Finance Network consists of some of the most proactive and commercially astute regional, independent accountancy firms in the UK. They specialise in providing corporate finance advice for smaller transactions.  Kirsty McGregor can be contacted at info@TheCFN.org.uk



"These developments will be an added pressure for SMEs and their accountants, alongside difficulties on the availability of products due to uncertain supply chains as a result of Brexit. We’ll continue to ensure SMEs are aware of such changes, and also continue campaigning for support such as the Director Income Support Scheme (DISS) for those that have slipped through the cracks."

Claire Bennison, head of ACCA UK - ACCA

"The first quarter of 2021 will be challenging for SMEs. Our Tracker reveals time and again that SMEs are facing down the issues but the situation is not sustainable. The challenge for the government as it prepares the March 2021 Budget is how it can alleviate these pressures and offer SMEs the lifeline they need."

Kirsty McGregor, Founder - The Corporate Finance Network