British businesses poorly cushioned against shocks in uncertain times

• Family remains the biggest source of support when UK businesses face a crisis – by providing finance or labour during hard times.
• The average business could only keep going for three months on current funds. One in ten – half a million businesses – have less than a month's worth of capital.
• Fifty one per cent of small firms with employees are potentially breaking the law by not taking out employers' liability insurance. Freelance professionals are least protected from claims.

One-man bands rule in the UK: 4.2 million of the nation's 5.5 million businesses have no employees and run entirely on the efforts of one man or women¹. But what happens when illness, accident or other life events take that person out of action? AXA found that for 44 per cent of British firms², it would spell closure and a rapid fall in income for those days, weeks or months.

Thirty one per cent say they could keep the business going, but only because their family would rally round them. Most commonly, their partner takes the reins, but with the growing number of ‘grey entrepreneurs', children and grandchildren are increasingly called in. And for one in twenty, it is mum or dad who gets a call.

Altogether, just 28 per cent could afford to call in professional help if they were out of action.

While most businesses surveyed reported steady or increasing profits over the past year, few feel confident enough to put money aside for hard times. The average business could only keep going for three months on current funds. And one in ten – half a million businesses – say their resources would not stretch even to the next month.

When it comes to finance, a quarter say they would turn to family and friends first for a loan rather than trust to formal financial mechanisms. Thirty per cent would use their personal credit card, and just 22 per cent would turn to business banking services.

Common misunderstandings about insurance persist

AXA's latest figures on insurance take-up among SMEs (first half of 2016) also suggest that under-insurance remains a risk for small firms:

• Fifty one per cent of small firms with employees are potentially breaking the law by not taking out employers' liability insurance (little change over the past three years). Fines can be as high as £2,500 for each day an employer isn't insured.
• Freelance professionals are the worst protected against claims. Only 35 per cent of those who provide professional services are covered for negligence claims or breach of data protection laws.
• By contrast, there has been a steady increase in the number of businesses covered for accident/injury claims from members of the public. In 2012, 66 per cent of firms had public liability cover; that is now 82 per cent, and rising.

We have a fantastic tradition of family at the heart of business here in the UK. Many entrepreneurs start out with a baby on their knee at the computer, or credit their earliest successes to the help and support of their partners and loved ones. But in an advanced economy like ours, businesses should also have a range of financial tools to call upon when they face unexpected illnesses, accidents, setbacks and shocks.

It is a worry that small businesses are still so exposed financially, and insurance gaps persist, even on legally required cover. There remains a job to do to inform businesses better about their risks and the support available – and these findings are a call to action not just to small businesses, but to everyone in our industry too.