Small businesses “unprepared” for unforeseen disasters with 20% without cash reserves
Simply Business estimates over two million British companies “could be days away from closure”
Most small businesses only have enough cash savings to last two weeks if circumstances forced them to stop trading temporarily, new research suggests.
The study, conducted by YouGov on behalf of insurance broker Simply Business, interviewed 1,015 small business decision makers and found that 52% of those surveyed had cash reserves of £10,000 or less, with 30% only owning cash savings of £500 or less.
20% of those questioned had no cash reserves at all but, despite this, 22% of those without stated they would be able to last at least six months if their business had to cease trading due to an unforeseen issue, such as a fire or a flood.
With average monthly fixed costs for small businesses estimated at £20,000 if they were to cease trading, Simply Business predicts that “this alarming lack of knowledge” could see more than 2.4 million small and medium British enterprises “out of action” if unforeseen disasters forced them to close for two weeks.
The research also suggested regional variations with average fixed monthly costs in London at over £40,000, which the insurance firm estimates would mean businesses in the capital could only survive for six days before facing closure if they had to cease trading.
Simply Business CEO, Jason Stockwood, commented: “Even after last year’s storms and flooding, which cost over £830m of damage to firms nationwidesmall businesses are still woefully underprepared for unforeseen circumstances which will prevent trading.
“Small business owners play a crucial role in the economic recovery, but we must ensure they are not existing so close to the brink.
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“While being a small business means you have a great deal of potential, it also makes you vulnerable so it is vital business owners across the nation proactively prepare for any eventuality so they can continue on their upwards trajectory rather than being cut short.”