Deep Dive: A closer look at the devastating economic impact of the pandemic

  • 28 Apr 2021

With the rollout of a vaccine now underway, there is hope that conditions for small firms will improve this year. But the pandemic has left a legacy of destruction that is still playing out.

The events of the past year have challenged small firms in ways that could not have been imagined only 14 months ago. Covid-19 has so far seen all four nations of the UK come in and out of national lockdowns, with severe restrictions on movement and mixing. This has served as a hammer blow to small businesses, many of which 
were already reeling. FSB’s Small Business Index for the final quarter of 2020 found just under 5 per cent of small firms now expect to close during 2021. 

 

How badly firms have been impacted has varied widely. The entertainments space, including cinemas, soft play centres, bars and restaurants, has been hit hardest, with many forced to close for long periods of time, while nightclubs and much of the events industry have been shut for the entire period. Inevitably, this has filtered through into job losses, and businesses failing. 

Other small businesses have fared better. Those who can have transitioned to remote working, moving operations into houses and setting up staff to work from home. Some sectors have even flourished on the back of lockdowns, with sales of baking products, home fitness equipment and technology rising as a result of people spending far greater time at home. Others will have benefited from consumers having greater disposable income as a result of not commuting or socialising. 

 

There’s no doubt that the months ahead will be tough, and that we are still in the midst of the pandemic, rather than at the end. But there is now hope of a return to something approaching more normal conditions as we move into the summer months. The rollout of a vaccine in particular means small firms are more optimistic now about growth prospects for this year, although the legacy of the pandemic will remain with us for a long time. 

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