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Cashflows Deteriorated at 45% of UK Companies in Q3

By Jon Munnery
8 October 2020

Close to half of all UK companies polled recently said their cashflow situation deteriorated over the course of the third quarter of this year.

Only 21 per cent of firms said their cashflows improved in the three months to the end of September, while 45 per cent said they got at least a little worse.

The figures are compiled by the British Chambers of Commerce (BCC), which has been keeping track of the financial dynamics and trends affecting UK companies throughout what has been an exceptionally turbulent year for most.

Small scale companies had a particularly difficult time in the third quarter, with 51 per cent saying their cashflow situation got worse during that period.

On business conditions more broadly, the BCC’s polling suggests that circumstances improved in the third quarter compared to the previous three months but a majority of companies still weren’t able to increase their sales.

Looking ahead to the last few months of the year, prospects for businesses have been made more uncertain by the arrival of a ‘second spike’ of coronavirus as announced by the prime minister Boris Johnson on September 18th.

According to the BCC, business conditions improved somewhat in the third quarter compared to the second but nonetheless they remain close to what are historic lows from an enterprise perspective in the UK.

“The manufacturing sector recorded the strongest improvements in the quarter, while consumer-focused services firms, where social distancing restricts activity, saw more limited gains,” said Suren Thiru, the BCC’s head of economics.

“The persistent weakness in cash flow is concerning as it leaves firms more vulnerable to external shocks, including further restrictions,” he added.

The BCC’s director general Dr Adam Marshall said in response to his organisation’s latest polling that the UK is clearly facing a difficult winter and that business conditions remain unavoidably fragile.

“It is time to be direct,” he said. “The economy will need more support, over and above the chancellor’s welcome recent efforts.”

“Ministers must stand ready to provide that support, and to strengthen measures to underpin business cash flow and jobs.”

Jonathan Munnery
Partner
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