The British Chambers of Commerce Business Tracker reveals that business conditions improved only moderately in the weeks since the UK economy suffered an historic contraction in Q2 2020, with firms still reporting high levels of reliance on government support schemes to help stem cash flow issues.
The unprecedented decline in business conditions seen during the second quarter is now levelling off, but firms still face difficult trading conditions.
Mixed picture on revenue
The number of firms reporting a rise in revenue from UK customers rose to 38 per cent, from 34 per cent in the previous tracker and is up significantly from the series low of 3 per cent recorded during the second quarter. However, despite this progress, the number of respondents reporting a rise in UK revenue is still not exceeding the number reporting a decrease (also 38 per cent).
Business to consumer firms were more likely to report improvements in UK revenue compared to other sectors, although these gains are from a low base due to lockdown restrictions, later reopening, and pent-up consumer demand.
A smaller proportion of firms (22 per cent) are reporting a rise in revenue from overseas customers than from UK customers (38 per cent) amid continued disruption to global commerce and trade flows.
While there was a slight improvement in the number of respondents reporting a decrease in their cash reserves (50 per cent compared to 55 per cent), it remains more than double the number reporting an increase (22 per cent). Despite the gradual reopening of the economy and more firms seeing a rise in revenue, 39% of businesses say they have three months or less worth of cash in reserve.
Of those reporting an increase in their cash reserves, a significant number of businesses cited government support schemes as a driver of this, with the number of firms using the furlough scheme (34 per cent) and the various loan schemes (30 percent) and grant schemes (16 per cent) still significant. 68 per cent of firms mentioned new business or customer demand as a factor.
With government support schemes set to wind down in the coming weeks, and with the potential reintroduction of lockdowns – either localised or national – it remains unclear what further support, if any, firms will receive when schemes end.