Factory workers with face mask protect from outbreak of Coronavirus Disease 2019 or COVID-19. Concept of protective action and quarantine to stop spreading of Coronavirus Disease 2019 or COVID-19.
Fladgate’s Restart Capital report also reveals that one in five SME’s said their business is already in “distress.” Photo: Getty

One in three smaller firms (SMEs) and 43% of medium sized enterprises do not expect to be in business beyond a year, according to a new report.

The research by law firm Fladgate said its survey of 500 SMEs paints a “concerning outlook” for the backbone of the UK economy.

Fladgate’s Restart Capital report also reveals that one in five SME’s said their business is already in “distress.”

Meanwhile, 31% of respondents said they are still in a “shock and denial phase” or “anger and depression,” which may be hampering their ability to decide how best to move forward.

The survey highlights says that 72% of SME leaders are trying to raise money to ride out the storm, while 46% said they did not succeeded as hoped.

It also found that private investors are willing to deploy capital to support SMEs, with nine in 10 investors or 90% recognising SMEs are the key to the UK economy.

In terms of investment, 85% of investors want to play an active role in their investments, they said they see the highest potential in supporting troubled businesses, with over 50% admitting they had experience of working with distressed firms.

Investors are most interested in allocating capital to sectors hardest hit by COVID-19, the report said.

Construction, which SME leadership teams revealed had experienced a 39% hit to turnover is seen as the most attractive sector for investment, with 29% of investors keen to invest in this market. 

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As government support for businesses in the wake of COVID-19 is unwound, the majority of SMEs and investors seek more government support to