Covid ‘disaster’ for new firms: Widespread collapse expected as new figures reveal challenge for start-ups
New businesses in the West Midlands face disaster because of coronavirus, with many at risk of folding in the new year.
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Figures reveal that less than half of firms set up in the Black Country and Staffordshire in the last five years failed to make it to the end of 2019.
And, with the arrival of the pandemic, business leaders today warned they expected a widespread collapse in future months.
They say firms that have struggled to survive lockdown measures since March may be forced to shut up shop if restrictions continues well into 2021.
The Federation of Small Businesses says firms in our region were “already up against it” before Covid-19 struck.
But many have already suffered irreparable damage after seeing orders collapse or by being forced to close to customers.
New data from the Office for National Statistics shows that between 2014 and 2019 more than half of new enterprises failed in our region. That percentage is now expected to rise sharply.
Chairman of Black Country Chamber of Commerce Corin Crane said: “Fifty per cent is a huge number, and it’s only going to get worse in the next two or three years.
"It’s been really hard for these businesses over the past six months.
"Unfortunately one problem for all start ups is cash flow – and Covid has stripped away any ability of planning for cash flow – it’s almost impossible for start-ups at the moment.”
It’s hard, but running a new firm is achievable
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“It has been a real battle this year, but we will survive. We’re not down yet.”
Co-owner of CB Beautiful Group in Walsall Charlie Battisson is remaining positive throughout the pandemic of 2020.
Having worked in the beauty industry since 1995, she said she thought it was ‘recession proof’. But she’s now admitted this is the “worst it’s ever been” in all the years she has been working.
She opened her salon in Lichfield Road, Rushall at the end of 2019, and said she had no idea of what was coming.
Charlie said: “Normally around this time of year we would be packed with people wanting treatments, but at the moment we are only filling one day a week.
“But we are very fortunate as we also run an academy alongside the beauty business, and we had all these students waiting who had already pre-paid their courses. So if it wasn’t for that then we wouldn’t really have any money.
“I’ve never know the beauty industry to slump, I always thought it was recession proof. People will always want their lashes and hair done, but for the first time in my life that has changed. People are so worried about what’s coming, paying their bills and mortgages, that they aren’t booking treatments.
“We are surviving. We’ll be ok, but if we were just a beauty business – and not an academy too – we would be really struggling.”
Gamble
“We opened our salon in November last year but previously did mobile treatments. It’s the newly self-employed beauty therapists that are hit the hardest. It’s always hard being a new business.”
New figures from the Office of National Statistics today just how difficult it is to survive as a new business – even before the hammer blow of coronavirus arrived.
The statistics show 980 businesses in Wolverhampton were set up in 2014, but after three years 585 were still active, and by 2019 just 390 remained. In Walsall 1,095 firms were set up in the same year, but three years later only 665 were still running – and then in 2019 just 465 were left.
It was a similar story in Sandwell – 1,295 companies started in 2014, but by 2017 only 765 were left, and that number had dropped to 500 in 2019. In Dudley 1,200 businesses were set up in 2014, but this went down to 745 in 2017, and then 525 in 2019.
Over in Stafford – 595 businesses were set up in 2014, but only 400 remained after three years – and then just 285 in 2019.
Across the UK, the five-year survival rate to 2019 was 43 per cent. Businesses in clothes manufacturing and food services such as restaurants were among the lowest nationally.
Mark Reynolds owns The Hop Vault, a craft beer shop in Stourbridge – and only opened in July of this year.
He said: “We didn’t know what to expect when we opened as we had no idea what normal was like. We felt it was a bit of a gamble but we opened anyway as we knew a few people in Stourbridge would be interested in craft beer but didn’t know if there would be enough to build a sustainable business.
Adjustments
“But it’s actually been quite busy. I think pubs being closed or under various restrictions has actually helped us. People who haven’t been going to the pub have been coming to see us instead and are now spending money on craft beer, rather than cheap supermarket beer.
“I don’t know how that works going forward – if those customers will go back to the pub and we’ll lose significant trade or if they’ll still come to us.”
Mark, a software engineer, runs the business with his wife Hannah Barley and his father Ron Reynolds.
He added: “When we opened we were worried about surviving six months. I don’t know if I worry about surviving five years, we worry month on month how Covid will affect us. But unless another major thing happens – like another pandemic – we feel like we can build a sustainable business.”
Tom Haynes, owner of dog care business K9 Anytime which was launched in 2017 and based near Shifnal, said: “We enjoyed steady growth before Covid-19, expanding from just daycare and hotel to introduce a training school, a groomers and the Pantry online shop.
“The challenges at first were changing the face of canine care and uprooting tradition by raising the bar to a new gold standard well above what was traditionally expected.
“Covid has meant we have had to make adjustments to daily operations. Group training classes and our popular social walks had to be cancelled, and our hotel has had no guests since March. But we are always optimistic. We look forward to seeing what 2021 brings and hopefully the return of guests as holidays and trips away for humans become feasible again.”
The advice from all business owners is to seek all the help that is out there. The Government has provided support over the pandemic including a Bounce Back Loan Scheme, the opportunity to defer VAT payments and business rates holidays. The Coronavirus Job Retention Scheme has been extended until March.