Almost half of businesses have continued to see a fall in sales in recent months, despite lockdown restrictions easing.
A survey by the British Chambers of Commerce (BCC) found business conditions remained “exceptionally weak” in the third quarter of 2020, even though much of the economy has reopened.
With companies enduring a “sustained cash crunch” as a result of the coronavirus crisis, the body has warned conditions remain “fragile” and firms need more support to “navigate a tricky period ahead”.
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It also said it saw little sign of a swift V-shaped recovery, which contrasts sharply with the view the Bank of England’s chief economist Andy Haldane, who this week dismissed pessimistic “Chicken Licken” views about the UK economy.
The survey of 6,410 firms, employing more than 580,000 people across the UK, found cash flow in the services sector remained at levels comparable to the recession a decade ago.
Hospitality and catering businesses had fared the worst, according to the BCC.
Overall, it said that while key indicators have improved from historic lows in the previous quarter, they remain significantly lower than before COVID-19 struck.
Nearly half of firms (46%) reported falls in domestic sales, down from 73% in the second quarter.
Two-thirds (66%) of respondents in hospitality and catering reported a drop in sales and bookings in the last three months.
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Suren Thiru, head of economics at the BCC said: “Our latest survey indicates that underlying economic conditions remained exceptionally weak in the third quarter.
“While the declines in indicators of activity slowed as the UK economy gradually reopened, they remain well short of pre-pandemic levels with little sign of a swift V-shaped recovery.”
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BCC director general Dr Adam Marshall, said: “Our findings clearly demonstrate that business conditions remain fragile in the face of uncertainty, with the prospect of a difficult winter to come.
“The economy will need more support, over and above the chancellor’s welcome recent efforts. Ministers must stand ready to provide that support, and to strengthen measures to underpin business cash flow and jobs.
“The disappointing test and trace system must be improved to ensure as many businesses as possible can function through the winter and beyond.
“A Brexit deal must be reached to avoid yet more disruption, and above all, businesses need confidence and calm, clear communication to successfully navigate a tricky period ahead.”
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A Treasury spokesman said: “Our support for business has reached, and continues to reach, millions of firms.
“The job support scheme is designed to protect jobs in businesses facing lower demand over the winter due to COVID and is just one form of support on offer to employers during this difficult period.
“Businesses can still access our loan schemes, now extended, defer VAT payments previously due in March, and benefit from business rates holidays, a moratorium of eviction for commercial tenants and the statutory sick pay rebate scheme.
“We’re also continuing to innovate in supporting incomes and employment through our plan for jobs announced in July, helping employees get back to work through a £1,000 retention bonus and creating new roles for young people with our Kickstart scheme.”