Strong recovery possible with right support, small firms tell Chancellor, as majority face reopening costs

  • 22 Jun 2020

The UK’s largest business group has written to Rishi Sunak outlining measures needed to enable small firms and the self-employed to bounce back from the current recession.

Mechanisms to help the small business community have been central to the Government’s programme of emergency business support, and the letter calls for them to have a similar place in recovery plans. Following the financial crash, 88% of individuals moving from unemployment into employment found work in either a smaller business or self-employment.

In the correspondence, the body’s Chairman warns “against excessive pessimism”, arguing that “a strong recovery is possible” so long as “further fiscal response… [is] calibrated to the extent of continuing temporary restrictions.”

 

FSB reiterates its calls for the two metre social distancing benchmark to be reduced should expert opinion allow for such a move, as those with smaller premises are especially struggling with the restriction, and the introduction of back to work vouchers to cover the costs of on-site safety adjustments as small firms reopen.   

Its new research shows that the vast majority (86%) of small businesses say they’ll need to make changes to their premises in order to do so safely. Of those that are across their respective government’s guidelines, 60% say it would cost up to £1,000 to reopen in-line with the relevant guidance – more than a quarter (28%) say it would cost more than £1,000. One in five (20%) small firms that have remained closed during the lockdown say they cannot reopen while current guidance is in place.

To protect livelihoods as the Job Retention Scheme (JRS) is gradually wound down, the group recommends that the Treasury consider:

  • Cutting Employer’s National Insurance Contributions (NICs), or uprating the targeted Employment Allowance, while extending NICs holidays in order to reduce the high fixed costs of employment and encourage job creation.  
  • Assisting small firms with apprenticeship training and wage costs as part of an apprenticeship guarantee for those who’ve had a qualification path disrupted or would like to embark on one in the near future, alongside a large-scale employment programme for young people akin to the Future Jobs Fund. 
  • A full statutory sick pay (SSP) rebate, or alternative mechanism, for all those who need to self-isolate over the coming weeks as the track and trace programme is rolled out, or experience secondary health conditions after isolating in the past.  

FSB National Chairman Mike Cherry said: “The fundamental question facing small businesses today is: can I open in a way that’s both commercially viable and safe? 

“Among those for whom the answer is yes, the majority will face additional costs as they adjust their operations. The Government should step in with back to work vouchers so firms doing the right thing can recover this expenditure.

 

“Our hope is that the gradual unwinding of the furlough scheme coincides with a gradual return of more normal levels of economic activity.

“But the job market has already taken a hit. To ensure opportunities exist for those who’ve lost work, or are looking for the first time, the Chancellor will need to take an ambitious and holistic approach to employment interventions.”

The letter warns that “revenue has collapsed” among small businesses, with FSB calling on the Chancellor to shore-up cashflow, balance sheets and investment by:

  • Ensuring discretionary grants reach those who have fallen through the cracks of  support schemes – such as suppliers to the retail, leisure and hospitality sectors, company directors, and the newly self-employed – and making sure “that any lack of support is reflected in future policy development.”
  • Taking a student loan-style approach to state-backed emergency loans for small businesses, allowing firms to start repayments once they are making a profit.
  • Widening access to R&D tax credits and introducing digital vouchers to encourage new-to-firm, not just new-to-market, innovation. 
  • Considering a temporary reduction in VAT and other measures to jump-start the economy.
  • Suspending or delaying reforms to IR35 and the introduction of the reverse VAT charge in the construction sector, set to take effect in April and March respectively.

The group also urges the Government to return to its manifesto and deliver on commitments to level-up the economy through:

  • Accelerated delivery of unprecedented investment in the UK’s broadband and mobile infrastructure.
  • The repair and enhancement of local road networks and the introduction of a scrappage scheme aimed at incentivising the purchase of clean vehicles.
  • Collaboration with local authorities to bring down car parking charges as high streets reopen. 

Mike Cherry added: “Millions of small firms and sole traders have been helped by emergency support mechanisms but hundreds of thousands have not.

“As we look to recover, the Chancellor should ensure that those who have fallen through the gaps are not punished further with tax rises or exclusion from new stimulus measures. 

 

“Many have secured bounce back and interruption loans to cover fixed costs as revenue disappeared through no fault of their own. What we have to avoid is a situation where small firms have one eye on repayments so hold fire on investment and hiring at a moment when we need them most. A guarantee that they wouldn’t have to start repayments until they’re turning a profit would allow them to crack on without fear.

“In a lot of respects it’s about going back to basics. If every small business knew they could get online easily, their customers could visit them using reliable roads, and not face parking charges when they arrive, that would do wonders for productivity, particularly in rural areas.”

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