NI Chamber & BDO survey: Cash flow crisis persists but business sees benefit from job furlough scheme

29th Apr 2020

  • 3 in 5 businesses have experienced a ‘significant’ fall in income
  • Most businesses have less than 6 months cash reserves left
  • 85% have furloughed some or all staff to date
  • The majority have found the furlough claim process straightforward

3 in 5 businesses have reported a significant fall in income as a result of the COVID-19 pandemic, with most businesses claiming they will run out of money in the next 6 months. This is according to the latest COVID-19 survey conducted by Northern Ireland Chamber of Commerce and Industry (NI Chamber) and business advisors BDO.

The survey, which was carried out during the period 22-24 April 2020, was a follow-up to the first COVID-19 impact survey published by NI Chamber & BDO earlier this month.

It also reveals that almost 3 in 4 businesses have used the online Job Retention Scheme portal with the majority (74%) finding the furlough claim process straightforward. 25% have also applied for the COVID-19 Business Interruption Loan Scheme (CBILS) with 1 in 10 firms having received their payment so far.

Business performance and cash flow

  • Most businesses have suffered a hit in revenue with 75% of firms seeing income fall in just 6 weeks.
  • For 3 in 5 businesses the fall in revenues has been significant.
  • Very few firms are seeing revenues rise during the crisis. In fact for every 1 firm that is seeing domestic revenue rise there are 14 that are seeing revenue fall.

Cash Reserves

  • 3 in 4 businesses have taken a hit on cash reserves – for 50% cash reserves have fallen significantly.
  • In fact, 2 in 5 respondents to the survey have either no or less than 1 months cash reserves left.
  • Two-thirds, 66%, have less than 3 months cash reserves suggesting little money in many businesses to meet the emergency situation many currently face.
  • Just 12% have more than 6 months cash reserves.  Just 2% have more than 12 months cash reserves.

Workforce and Jobs

  • The most significant impact on jobs to date has been a reduction in hours worked by staff (61%).
  • 2 in 5 businesses have seen a reduction in staff numbers.
  • 43% have seen a reduction in use of contract/agency workers.
  • Only 5% have seen hours worked increase.

Uptake and experience of the Job Retention (Furlough) Scheme

  • 85% of businesses have furloughed some or all of their staff.
  • 24% (1 in 4) have furloughed all of their staff.
  • Most businesses have used the online portal to make a claim – 74% have made/attempted to make a claim while 25% have yet to but do plan to.
  • Of those who have made a claim, the majority (74%) have found the process straightforward and the claim was submitted with ease.
  • 21% found it difficult to submit a claim.
  • 6% attempted but were unable to access the portal.

 COVID-19 Business Interruption Loan Scheme (CBILS)

  • One quarter of respondents have tried to access CBILS – securing overdrafts, term loans and asset finance largely used to finance every day operations and pay debt.
  • Just 10% of those business that have applied to CBILS have received payment. Some businesses say that they will have to scale back operations as a result.
  • A further 20% plan to access the scheme.
  • Around half of businesses (47%) have no plans to apply to CBILS – the main reasons being that they have enough cash for now or want to wait to see what happens with the lock down.
  • 25% of those that have no plans to apply for CBILS said that they couldn’t afford to repay the loan.

Awareness and uptake of other Business Support Schemes

  • Deferral of VAT payments (41%) and the Business Rates Holiday (35%) have had the greatest uptake to date of other measures of support.
  • 21% have accessed grant support offered through the £10k cash grant scheme.
  • However, around 1 in 5 businesses (19%) have tried to claim the cash grant but were unsuccessful. The main reason is that they did not meet the criteria.
  • The least well known schemes include the Statutory Sick Pay Refund and HMRC Time to Pay scheme.

Commenting on the findings, Ann McGregor, Chief Executive, Northern Ireland Chamber of Commerce and Industry, said: “It is evident that many business owners are facing an acute cash flow crisis, as well as fears about the long-term impact of the lockdown. We welcome how the UK government has listened to the concerns of business to date and is taking steps to get cash to the front line where it is needed. However a lot of the support has increased business debt and this will hinder recovery unless there are more grant based systems.

“The Job Retention Scheme (furlough) has been extremely helpful for businesses. HMRC’s capacity to deal with the demand from business for the Job Retention Scheme has also been encouraging so far – and their staff who have been working under immense pressure to get it up and running deserve our recognition and thanks.  Whilst this furlough scheme cannot be indefinite, it will need to run beyond 30 June in some form to help businesses transition toward a ‘new normal’ as the lockdown is eased.

“It is also vital that firms do not miss out on other funding and supports available including the NI Executive’s forthcoming Hardship Fund. We also encourage businesses to also look at some of the less recognised schemes including the Statutory Sick Pay Rebate Scheme and HMRC Time to Pay, which will all help firms with cash flow issues.”

Brian Murphy, Managing Partner, BDO, said: “The continued erosion in revenue for so many businesses across Northern Ireland is sadly not unexpected and will have long lasting consequences for the future of many companies. Covid-19 has hit the business community hard, with hospitality all but closed and manufacturing and services struggling to maintain operations and employment during this lockdown phase.

“Whilst the health of people will always be the number one priority, it is important that businesses are given every opportunity to come back fighting. Proactive planning and continued support is vital if these companies have any chance of rebuilding their revenue streams.

“Many companies have applied for a range of schemes offered by Government, but despite the huge quantum’s that have already been committed, more still needs to be done. We are seeing businesses fall through the cracks of eligibility for these grant schemes, and for at least 25% of respondents the option of accessing a loan is not a real option due to their likely inability to repay it.

“With many businesses having assessed the immediate impact of Covid-19 to their operations, it is critical that they now plan their road to recovery and understand what they need to do to ensure they are viable in the months ahead. Understanding what support mechanisms they can avail of and how they manage and plan for their recovery will be key to their survival over the coming months.”