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Impacts of the Covid-19 crisis: evidence from 2 million UK SMEs

Author

Listed:
  • Hurley, James

    (Bank of England)

  • Karmakar, Sudipto

    (Bank of England)

  • Markoska, Elena

    (Bank of England)

  • Walczak, Eryk

    (Bank of England)

  • Walker, Danny

    (Bank of England)

Abstract

We introduce a novel data set to analyze the impact of the Covid-19 crisis on SME cash flows. The crisis led to a sharp drop in economic activity in the UK, which hit SMEs harder than larger businesses. The data set comprises monthly information on all 2 million SMEs that have current accounts or debt with nine major banking groups, with roughly 5 billion data points in total. We document a few basic facts on UK SME cash flows during Covid-19. (1) The virus and the public health interventions coincided with a 30 percentage point reduction in turnover growth for the average SME. (2) There was significant heterogeneity in the turnover shock across SMEs, with the biggest reductions for younger SMEs in consumer-facing sectors in Scotland and London. (3) Cash flows were broadly flat on average and there was much less heterogeneity across SMEs. (4) SMEs with average turnover growth in 2020 were most likely to use the main government-guaranteed loan scheme for SMEs, as well as those in the hospitality sector in more affluent areas of the country. Our analysis provides a framework to monitor SMEs as the sector recovers from the pandemic.

Suggested Citation

  • Hurley, James & Karmakar, Sudipto & Markoska, Elena & Walczak, Eryk & Walker, Danny, 2021. "Impacts of the Covid-19 crisis: evidence from 2 million UK SMEs," Bank of England working papers 924, Bank of England.
    • Handle: RePEc:boe:boeewp:0924
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    References listed on IDEAS

    as
    1. Elena Carletti & Tommaso Oliviero & Marco Pagano & Loriana Pelizzon & Marti G Subrahmanyam, 2020. "The COVID-19 Shock and Equity Shortfall: Firm-Level Evidence from Italy," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 9(3), pages 534-568.
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    4. Viral V Acharya & Sascha Steffen, 2020. "The Risk of Being a Fallen Angel and the Corporate Dash for Cash in the Midst of COVID," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 9(3), pages 430-471.
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    7. Alexander W. Bartik & Marianne Bertrand & Zoe Cullen & Edward L. Glaeser & Michael Luca & Christopher Stanton, 2020. "The impact of COVID-19 on small business outcomes and expectations," Proceedings of the National Academy of Sciences, Proceedings of the National Academy of Sciences, vol. 117(30), pages 17656-17666, July.
    8. Elena Carletti & Tommaso Oliviero & Marco Pagano & Loriana Pelizzon & Marti G Subrahmanyam, 0. "The COVID-19 Shock and Equity Shortfall: Firm-Level Evidence from Italy," Review of Corporate Finance Studies, Oxford University Press, vol. 9(3), pages 534-568.
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    Cited by:

    1. Konings, Jozef & Magerman, Glenn & Van Esbroeck, Dieter, 2023. "The impact of firm-level Covid rescue policies on productivity growth and reallocation," European Economic Review, Elsevier, vol. 157(C).
    2. Hurley, James & Walker, Daniel, 2021. "Did the Covid-19 local lockdowns reduce business activity? Evidence from UK SMEs," Bank of England working papers 943, Bank of England.
    3. Zhi, Bangdong & Wang, Xiaojun & Xu, Fangming, 2022. "Managing inventory financing in a volatile market: A novel data-driven copula model," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 165(C).

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    More about this item

    Keywords

    Covid-19 pandemic; small and medium-sized enterprises; SMEs; government support schemes;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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