The number of firms saying they are at risk of failure has more than halved in the last six months, but 1 million workers are employed in businesses which fear closure.
The latest information from the Programme on Innovation and Diffusion (POID), a research group at the London School of Economics and Political Science (LSE), shows that 1 in 16 firms say they are now at risk of closure in the next three months – down from 1 in 7 covering 2.5 million jobs back in January 2021.
The POID Business Tracker (based on Office of National Statistics data) shows the most significant improvement in confidence came from those businesses with less than nine employees – although these are still the firms which are most likely to say they are at risk.
Peter Lambert, co-author and research economist, said: “The significant decline in at-risk businesses relative to 2020 is very welcome. These numbers can, however, be quickly reversed by changes to Covid policies, or threats such as new variants. In May and June 2021 there was an uptick in self-reported risk of failure, coinciding with the increasing concerns about the Delta variant and the announcement that the so-called “Freedom Day” was to be delayed. This shows that unexpected changes to lockdown policy – while sometimes necessary– can have sizable impacts on business confidence.”
Peter adds: “Looking forwards, the tapering down of Government support for furloughed workers may give rise to additional volatility in the number of firms at-risk of failure.”
Apolline Marion, co-author and research economist, said: “The most significant improvement in confidence came from micro-enterprises (0-9 employees) and small enterprises (10-49 employees). These were also the most severely hit groups earlier in the pandemic, so it is encouraging that they have responded strongest to the improved business landscape.”
Professor John Van Reenen, co-author and director of POID, said: “The survey question we study has been asked in a consistent way since October 2020, and we began reporting on these data in January 2021. At that time, things looked very bleak: more than 15 per cent (1-in-7) of businesses were on the brink of exit. The reduced number of businesses at risk of closure due to COVID is welcome news. But as winter approaches, and with the possibility of new strains emerging, nothing can be taken for granted.”
Read the blog here: Risk of Business Failure: POID Tracker