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UK SMEs demonstrate their resilience and innovation during Covid-19

Since the start of the pandemic, small and medium-sized enterprises (SMEs) have been one of the hardest hit groups of UK businesses.

When the country entered its first lockdown on 23rd March, many SMEs were forced to close and lost their entire income overnight. While some were able to reopen and recover business income after this period, continued local and national lockdowns have negatively impacted the financial health of SMEs. In spite of the blows they have been dealt, SMEs have continued to demonstrate their resilience, and this ‘small but mighty’ spirit will be vital in helping them through what continues to be an immensely challenging business context.

Understanding the financial impact of Covid-19 

At the start of the crisis, Aldermore was keen to understand the financial impact that Covid-19 was having on these enterprises and how we could best offer support. Our research last summer found that the average UK SME has lost 30% of their monthly business income as a result of the pandemic, a small improvement from 34% in April. 

SMEs across the UK were impacted differently depending on their region and sector. The average SME in Wales, for example, lost 54% of their income compared to a loss of 26% for small businesses in the East Midlands. Across the UK, those in the hospitality and leisure sectors were unsurprisingly the worst affected, losing on average over half (54%) of their monthly revenue.

‘Small but mighty’ 

Fortunately, many businesses managed to swiftly adapt to the new trading conditions created by lockdown. One in five (20%) reduced their operating costs and discretionary spending,13% withdrew savings and one in ten (9%) found other ways to fund their business, such as through personal loans.  

Alongside these measures, one in ten (10%) pivoted to an entirely new market. Mauveworx, a point of sale marketing company and Aldermore customer, managed to start producing PPE for NHS workers throughout lockdown. Mauveworx ordinarily supply retailers with printed point of sale marketing materials and had no prior experience in PPE. Yet, with innovative thinking and a talented team, they were able to diversify and, in doing so, help our frontline NHS workers in the battle to save lives.

Alongside innovation and diversification, there’s been a trend towards SMEs focusing more on their existing clients or customers. Almost a quarter (23%) have have taken steps to focus on client and customer retention, while one in five (20%) have increased the amount of communication to their customers. Businesses have also recognised the need to shift their technological capabilities: 18% have moved more of their business online, whilst one in ten (12%) have introduced new technology to maintain business as usual. 

The period ahead will continue to be highly challenging for SMEs, however they have shown that they are strong in the face of adversity, are adapting their business models, finding different and innovative ways to increase income, as well as diversifying into new markets. 

Aldermore was founded out of the 2008 financial crisis to support SMEs struggling to find the support and capital they needed, so they’ve always been at the heart of what we do. That’s why we launched our ‘Small But Mighty’ business campaign to highlight the resilience and adaptability of UK small businesses impacted by the Covid-19 pandemic.

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