Over half of start-ups only have enough cash flow to survive six months

A number of worried UK start-ups only have enough cash flow to last them six months at most, new findings show.

Over half (57pc) of start-ups only have enough cash flow to survive a maximum of six months, according to new figures.

The survey from ProSapient, alongside investment bank Adelpha, gathered responses from 277 start-ups representing 10,000 employees. Almost half work in software and services, technology hardware and professional services – these have an estimated valuation total of £4.1bn.

UK start-ups are now expecting revenues to fall 47pc as a result of COVID-19. There is a split of revenue impact, with many start-ups currently experiencing some positive impact on revenues due to their digital products, social impact or ability to help in the current environment.

At the other extreme, a quarter of respondents are expecting a decline of more than 75pc. Half of those working for start-ups will be on furlough by the end of April.

More than half (56pc) of funding of UK start-ups comes from private individuals, compared with 18pc from venture capital and private equity funds, 15pc from other sources (including government and public markets) and 11pc from EIS funds and venture capital trusts.

Jordan Shlosberg, co-founder of proSapient, said:

“The current environment is extremely challenging for UK start-ups, a sector which employs over 330,000 people in the UK, according to Crowdcube. Revenues, productivity, runway and employment have been hit. The majority of Entrepreneurs’ Relief has been withdrawn. Start-ups are largely ineligible for the government-backed bank loans. And most founders have already bet the majority of their personal wealth on their businesses and are in no position to use any remaining assets as collateral to access further funding.

“While the new funding measures announced by the UK government are an excellent start, they need to go further. The package is 30pc smaller than similar schemes launched in Germany, despite the UK start-up ecosystem being nearly four times the size in terms of deal volumes,” Shlosberg concluded.

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Kaley Rosenbaum

Anna is Senior Reporter, covering topics affecting SMEs such as grant funding, managing employees and the day-to-day running of a business.

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