Intelligent Issue 20 - Page 14





Despite COVID-19 restrictions subsiding in the UK , many SMEs are living off an ever-increasing debt burden . Douglas Grant , CEO at Manx Financial Group , offers insight into this and how SMEs can remove themselves from government funding .

A vaccination and booster rollout continues in the UK and with restrictions subsiding , you would be forgiven for thinking that the UK has returned to some semblance of normality .

Whilst this may be the case in many sectors , a great deal of the UK ’ s small and mediumsized enterprises ( SMEs ) are living off an ever-increasing debt burden , with company borrowing to survive the pandemic reaching just over £ 80 billion .
At the height of the pandemic , many businesses were forced to pause trading and the government justifiably intervened with a triage of loan schemes to provide funding through the British Business Bank . The Bounce Back Loan Scheme ( BBLS ), Coronavirus Business Interruption Loan Scheme ( CBILS ) and the Recovery Loan Scheme ( RLS ) were introduced sequentially to support businesses with limited capital buffers facing crippling liquidity pressures due to pandemic-induced uncertainty .
These emergency loan schemes have leveraged SMEs to the sum of £ 47.36 billion , £ 26.39 billion and £ 1.06 billion respectively , with almost 2 million government-backed loans having been approved .
While these emergency loan schemes have provided a fundamental lifeline to many businesses , playing an instrumental role in keeping many resilient SMEs alive during the pandemic , now must be the time to scale them back .
Why now ?
Small businesses entered 2022 battling strong headwinds . The rising costs of goods and utilities , coupled with a tightening of the labour market , subsequent wage inflation and continued supply chain issues resulted in an unprecedented demand for working capital . Subsequently , companies sought to remedy these issues using emergency loan schemes . As a result , the UK SME debt burden has reached an all-time high and the number of weak zombie-like businesses surviving only to reduce their debt piles has exploded .
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