Almost 600,000 UK employers are at risk of business collapse in the spring if there is no extension of government coronavirus (COVID-19) support, according to a new report by the Institute for Public Policy Research (IPPR).

Those employers account for a third of the UK’s business turnover and employ around nine million people.

Most companies will soon be expected to begin repaying government-backed loans taken out during the pandemic, and to start paying backdated VAT bills for the past year.

The IPPR is calling for rapid action by the Chancellor to save the businesses on which UK economic recovery will depend when the lockdown is gradually eased by extending and enlarging business support now.

The number of firms with less than three months’ cash reserves, considered a danger point for a business, rose sharply over the four months to the end of January.

Carsten Jung, Senior Economist at the IPPR, said: ‘This is a moment of great peril for more than half a million UK employers as their cash reserves run perilously low and their businesses hang on by a thread.

‘In just a few weeks, UK businesses face a dangerous precipice when the many kinds of government support that have kept them going for a year are suddenly taken away. For the sake of the economic recovery, businesses should be given a boost. The time for action to save our economy is now.’