New research suggests that over 900,000 small businesses are in danger of going out of business in the next few months, threatening a new wave of job losses.
According to the Center for Economic Performance (CEP) and the Alliance for Full Employment (AFFE), the end of business support programs threatens a huge spike in bankruptcies for UK companies.
Almost 15 percent, more than one in seven British companies, are threatened with closure, especially those with fewer than 10 employees.
Professor John Van Reenen and Peter Lambert said the dire scenario they foretold in their report can be mitigated by imaginative government intervention.
“Without further policy action, companies face a cruel bankruptcy,” said Prof. Van Reenen.
“Current policy needs to be changed to provide protection now and show a path to post-pandemic prosperity,” adds Lambert.
The impact on employment is “grim”. Around 2.5 million jobs are threatened by company closings, the report warned.
Former Prime Minister Gordon Brown, who started the APE last year, urged the government to use the report to make a “much-needed” long-term business recovery program the centerpiece of the budget in March.
He said: “Governments cannot afford to be behind the curve, especially in a crisis. You need to be at least two steps ahead.
“But today the fate of thousands of small businesses hangs in the balance. Millions face an uncertain future after March if the vacation is to end.
“Youth unemployment is already at record levels – all concerns a forward-thinking government should address today. With all the welcome focus on aid through loans and vacation finance, the government has said little and done little to offer long-term survival to firms in difficulty.
“If we want to save good small businesses that are innovative and forward-looking, but are at risk of going under without help with their investment plans, the budget needs to drive action.
“It is time to give hope to new, dying businesses.”
If Chancellor Rishi Sunak followed the report’s advice, he could prevent “the liquidity crisis of 2020 from becoming the solvency crisis of 2021,” Brown said.