Small business revenues have plummeted by 28% during the COVID-19 lockdown period, research shows.
Analysis of data by accounting platform Xero (XRO.AX) found a significant downturn in revenues and jobs during the lockdown period, with small-to-medium businesses (SMEs) taking in 28% less in May and 26% less in April, compared with the previous year.
It also found invoices are taking longer to be paid, with the average time for small businesses to be paid increasing sharply by 7.8 days since February — from 30.7 days to 38.5 days.
With late payments already a point of concern for SMEs, longer payment times are likely to compound the cashflow stress, Xero said.
The new findings underpin Xero’s Roadmap to Recovery manifesto, which calls for extra government support to help SMEs rebuild.
Xero’s small business insights (SBI) payroll data also found small business employment fell by 6% between March and May, even before the government’s coronavirus job retention scheme begins to reduce its support over the coming months.
Small businesses in the hospitality sector saw the largest number of job losses — 11% in April and a further 3% in May. This was followed by the rental, hiring and real estate sector which saw job losses of 3% in April and 7% in May.
Although the impact of COVID-19 has been felt across the country, the data shows small businesses in the east midlands suffered from the most job losses, with a 4% fall in April and 9% fall in May.
Comparatively, small businesses in the south of England saw a 6% fall in job losses in April, and a 0.1% fall in May.
The hospitality sector and the arts and recreation industries were hit the hardest, with the former experiencing a 57% revenue fall in April, and a slight improvement to 54% in May, while the latter was hit with a 41% fall for both months.
Meanwhile, the construction and manufacturing industries both saw smaller declines in May. Construction saw a 45% fall in April, with an improvement to 31% fall in May, while manufacturing saw a 28% fall in April, compared with 18% fall in May.
Xero’s recommendations for how the government can support SMEs include calls for 30-day payment terms as standard, digital tools tax relief, improved regional internet access and an offset of technology expenses against tax.
The launch of the manifesto is the first step of a campaign to support small business recovery. It calls for the government to meet the “levelling up” agenda as part of its election promise.
“The pandemic has had a devastating impact on business. As our customer data shows, jobs are being lost and the creation of new ones will depend on how quickly the economy can be rebooted,” said Gary Turner, UK managing director of Xero.
“As a digital service provider to more than half a million small businesses in the UK, we have a unique perspective on the areas where the government needs to create a more supportive environment over the coming months if the economy is to regain the lost ground.
“With the right support, small businesses will be able to provide much-needed job opportunities and a vital economic boost for the UK.”