Figures released yesterday have confirmed what economists have feared since the beginning of lockdown - that the UK has now entered a technical recession after two consecutive quarters of economic decline. The ONS did, however, confirm that the economy grew in June as lockdown restrictions began to be lifted.
One area of rapid recovery will come from UK SMEs. A recent survey indicated that 60% of SMEs in the UK are optimistic about the future of their business - a sign that these ambitious firms will be looking to grow after the impacts of Covid-19 begin to dissipate. SMEs make up 99.9% of private sector businesses and with such a significant portion of firms able to adapt quickly, growth in this sector could be rapid.
Small businesses already employ over 16million people in the UK and before coronavirus the sector was growing at a faster rate than the overall job market. A return to this would provide a welcome boost. There has already been significant support for UK SMEs from the government through loans and more recently a £20million grant program to help firms tackle issues arising from Coronavirus.
Luke Davis, CEO of IW Capital and private equity expert, discusses the importance of SME growth to economic recovery:
“These figures are not wholly surprising given the catastrophic impact that lockdown had on many business. The word recession in the context of previous years is normally a by-word for low confidence, but in this case that is not necessarily true. Many firms are optimistic about their prospects and want to grow. Resilience is an important part of any business and firms that have survived this period will now be looking forward to growth and opportunity.
Opportunity comes out of crises, the global financial crash of 2008 led to the creation of the FinTech industry that is now one of Britain's most successful sectors. There will undoubtedly be firms and sectors that will go on to make this impact. If current conditions persist - and there is no second wave - I would be surprised if the recession continues into next quarter.
The small business community and its success is as important to the economy as anything else in the near future. With an economic contribution of over £2trillion, the success of the UK economy as a whole may in future hinge on the prosperity of SMEs, start-ups and high-growth firms. There are a fantastic range of innovative, growing SMEs that we work with which are likely to drive our private sector forward in the coming years."