One-third of SMEs in the UK will be unable to cover their costs by the end of July, with significant implications and knock-on effects for Irish businesses, according to new research from Bibby Financial Services (BFS).

The plight of UK SMEs continues despite the £330bn package of loans and guarantees announced by the British government to tackle the effects of the Covid-19 pandemic lockdown.

BFS’s survey of SMEs also suggests that more than half will struggle to cover costs should the UK lockdown continue into the third quarter.

Commenting on the research, Mark O’Rourke (pictured), managing director of Bibby Financial Services Ireland, noted that the UK and Irish SME sectors are closely linked, with many SMEs in both countries trading directly with one another.

“What happens in the UK has significant knock-on effects for Irish SMEs, and the research gives a stark warning that, in the midst of the current crisis, our small and medium-sized businesses are more exposed than ever to the damaging effects of bad debt and a lack of cashflow.

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“Despite the severe challenges facing our society and economy at present, we’re continuing to do all we can to help SMEs cope with cashflow, working capital and currency issues to ensure businesses can get the support they require and continue to operate.”

Almost two-fifths of UK SMEs have paused their operations entirely to minimise costs, and a further 38% have closed parts of their operations. BFS’s research also indicates that one-quarter of UK SMEs have written off an average of £35,000 in bad debt since the beginning of February.

Earlier this month, BFS Ireland reported that cashflow, working capital and currency issues were among the key concerns for Irish SMEs amid the Covid-19 crisis.