This episode covers all you need to know on the latest issues impacting small businesses, including the rising cost of doing business, international trade disruption and new rules for disputes over commercial rents.
This episode is in partnership with Dell Technologies, visit https://www.dell.com/en-uk for more.
Martin McTague: FSB National Chair
Lucy Monks: FSB Head of International Affairs
Daniel Bellis: FSB Senior Policy Manager
Jon Watkins 0:31 Welcome to the latest first voice monthly roundup podcast brought to you by First Voice magazine, the official flagship magazine of the Federation of Small Businesses, and the go-to podcast for news, tips and important information for small businesses and the self employed. This episode is our May Small Business Round-Up in which we will take a look at some of the important issues hitting the headlines at the moment and which you need to be aware of right now as small business owners. To help us look at today's issues I am pleased to say I'm joined by three guests. They are Martin McTague, who is national chair of FSB and will talk us through the current challenges around the cost of doing business. Lucy Monks FSB's Head of International Affairs will offer us an update on current international trade disruption. And then Dan Bellis Senior Policy Manager at FSB is going to talk us through the commercial rents resolution protest. So thank you to all of you for joining us. Martin, I'll start with you, if I may. We've heard a lot recently about the rising cost of living, but also the rising cost of doing business. Just how big a rise are we seeing when it comes to the cost of doing business right now, and what are some of the most impacted costs?
Martin McTague 1:57 Well, in our latest Small Business Index, it says that 90% of the people we surveyed were seeing input costs go up significantly. And the major element of that is energy. I mean, to think of some of the worst examples, we added Scarborough Hotel, where the costs of her energy had quadrupled, overnight. I mean, it is a problem that, you know, when it comes to ordinary consumers, they have the cap. But when it comes to small businesses, they have no cap and no ability to buy forward. So they're stuck with these very high prices.
Jon Watkins 2:45 Yeah, brilliant. And some some organisations, some businesses in some sectors, I guess, are able to push costs on to the end user, but many are not what are the consequences for for businesses and consumers of this rising cost of doing business?
Martin McTague 3:02 Well it's significant because it's squeezing profitability. That means that businesses can't invest in their people, they can't invest in training, if they need to pivot to new products and services, they don't have the resources to do that. At the last check by ONS, we were seeing that 46% of businesses across the UK had less than three months' cash left. So this is a serious issue for all small businesses.
Jon Watkins 3:33 Yeah. And what is it the FSB is looking to the government to do about it?
Martin McTague 3:38 Well, there's a lot of things they can do immediately, they could help with some of the Covid hangover that you've got with sick pay currently running at about £3,000 pounds a company, and that could be significantly offset by them, reinstating the sick pay rebate. There's also a lot they could do about late payment. Late payment is the most serious problem for all small businesses in the UK, they could start by making sure that anybody that they trade with as a government is prevented from trading unless they sign up for the prompt payment code where they could nominate an accountable person in every company to make sure that person is responsible for paying people on time. And they could also give the Small Business Commissioner a lot more power to investigate some of the worst offenders.
Jon Watkins 4:35 Yeah, that's great. And just finally, on this topic, Martin, you know, what can small businesses themselves do? You know, can they seek advice and guidance? And are there steps they can take to try and manage the impact?
Martin McTague 4:47 I mean, there are serious implications here that many people can't avoid. But what I would suggest is before this gets too serious, talk to your bank, because in many cases they will recognise that they'd rather you come to them early, than come to them when the crisis is too difficult to manage.
Jon Watkins 5:07 Yeah, so get ahead of the curve. Thanks, Martin. That's really interesting. on a on a very pressing topic as well, Lucy, I'm going to come across to you next, if you don't mind. I think you're gonna speak to us a little bit about international trade disruption. What exactly do we mean by that term? And what disruptions are we seeing at present?
Lucy Monks 5:27 Yeah, so when we're talking about disruption to international trade, we can be talking about everything from political or economical physical blocks taking place. So a good example of this was the Ever Given getting stuck in the Suez Canal last year, I don't think anyone can forget that image in particular, or it could be the availability of goods or services needed to create a product that was part of a supply chain. So you were in the market to buy a brand new car in the last year, you might have found yourself on the bottom of a very long waiting list. Because there was a global, there is a global shortage in microchips, which has significantly impacted manufacturing. But obviously, top of many people's minds at the moment have been disruptions that have occurred because of the Russian invasion of Ukraine and closer to home, the need to adapt to new post Brexit requirements to export goods. So on Ukraine, it's a pretty substantial exporter of many core materials to many countries across the world. And for very clear reasons the invasion has caused significant damage to Ukraine's ability to produce and export anything right now. The UK imported about a billion pounds worth of goods and services from UK last year, and mostly in goods like materials to manufacture such as steel and iron and from food and animal products. I think most critically, you might see this in the restaurant or food trade. So about 11% of the UK's vegetables and fruits came from Ukraine last year. So either you are experiencing or have heard about the disruption that is having on the food industry. And of course, in Brexit, there's a rough new rules in place that businesses have got to get used to, which is affecting access to consumers and customers in Europe and raised costs for businesses as well.
Jon Watkins 7:13 Yeah, you touched on some specific disruptions there and some individual impacts on businesses, but But you know, what is the potential impact on small businesses in the UK? Just how big an issue could this be? As it rumbles on?
Lucy Monks 7:29 Yeah, I mean, you spoke earlier with Martin about some of the stresses that are facing UK economy and small businesses in general. And some of that is being driven by what's happening internationally. So there's a huge amount of small business owners that will have seen an increase in costs and 60% of those citing fuel costs, as a particular example. Not all of this is to do with what's happening with Russia and Ukraine at the moment, but some of it quite substantially is. So even if your business isn't a huge consumer of energy directly, you might find that prices are increasing in other places in your supply chain. And a lot of people are puzzling on whether to pass these increased costs to customers or if they're going to take them up themselves. On the EU side, some small businesses have pulled out of exporting. So the last small business survey showed that one in eight owners of businesses have said that they are going to, they have temporarily, or permanently stopped exporting to the EU, and a further 9% are considering it. And for some businesses, all of this as a whole will be a lot to reckon with. But I just want to say that it's not all negative. The EU is going to continue to be a really important market for UK businesses. And there is demand out there for what British businesses are able to provide so brilliantly, which is also a key message that we're sending to government. It's just about getting the administrative barriers and bringing those down and making it as easy as possible again,
Jon Watkins 9:03 I guess something we hear a lot on this podcast is that FSB is away in the background lobbying for action. What you looking for the government to do around this issue specifically?
Lucy Monks 9:15 Yeah, we are absolutely we're incredibly active in this sphere. We're very clear with government about what needs to happen. So we've basically tasked the government to say that you need to look at smart ways of reducing costs of doing business and help alleviate some of the pain that small businesses are feeling right now. You may have seen in the news this week, the government stated that they were going to postpone again, new post-Brexit rules around the import checks for a lot of goods that was originally slated to come in for July this year. This is a good temporary (must be stressed temporary) alleviation on some of the burdens that small businesses are feeling and it says, the government says, it's doing this in the hope that it's going to reduce some of the costs of doing business. But there will be a new import regime in place the Government says again by Autumn 2023. So what we're saying to government is make sure you do this in a smart way, use digital platforms, look at ways that you can reduce costs for business, and reduce the time it takes for business, given that they are now going to postpone for for a year and a half. So we'll be working hard to make sure that they do think a bit smarter about these processes. We also have to be really mindful of the fact that this isn't just about imports, although that's what's been the focus of news this week. So exports are obviously really feeling the burden associated with these new bureaucracies. So we're having continued conversations about the implementation of the UK EU agreement and how it can be improved for small businesses. And I hope that we'll be able to share some positive news. For you on this at some point. There are also new opportunities for businesses looking to import or export from new territories that might have not considered before so the the trade agreements with Australia and New Zealand have been completed, agreements are set to be implemented at the end of the year. There are sections in those are dedicated to pulling down barriers for small business. I was in Aberdeen at the top of the week, meeting with the UK and US negotiation teams on trading into America. And, again, small businesses have been put in front and centre of building a new economic relationship. So that's another positive move. But we are very mindful that people are feeling pressures right now. And some of the stuff that you and Martin discussed are things that we really want the government to look at doing to support business, as well as some of the easements that I talked about in terms of international trade.
Jon Watkins 11:58 Yeah. And again, what can small businesses themselves do.
Lucy Monks 12:02 I think, make sure that if you are importing or exporting or think that you might be liable for anything that's happening in Russia, obviously, make sure you keep in touch with the government's website and the FSB's website to get the latest news and information. There's a raft of support that's available online, including on FSBs website. So keep up to date with that. If you've ever got any concerns or questions, of course, you can contact us and we'll do our best to raise your concerns with government or to respond with any information we can, to help.
Jon Watkins 12:37 Excellent, thank you. The third topic I want to chat about is the commercial rents resolution process. Now, a new law is, is now in place to help resolve certain remaining commercial rent debts. But before we get into that, Dan, can you tell us what the issue is here and how it's affecting small businesses?
Daniel Bellis 12:59 Sure, I think so. I'm sure there will be many businesses out there that have already forgotten the legacy of the pandemic of last couple years and still echoing in many businesses today. But during all the various lockdowns and lack of footfall, especially in some sectors, caused businesses to suffer quite badly forced closures meant that many businesses were left with a choice of what bills and salaries do they pay him and which ones unfortunately, do they not pay. That was the reality for many businesses during what was an incredibly difficult time. And that meant that there were a number of businesses right the way across the country that built up unpaid rent debt. So this is where basically businesses chose to pay salaries or, or heating bills or whatever it may have been. But decided not to pay the rent during that period, and have been unable since, to reach an agreement with the landlord about what to do with that. Because obviously, it was a difficult time during that pandemic. And difficult decisions have to be made. And in some cases, it hasn't been possible for landlords and tenants to naturally agree some sort of shared position between themselves. So this is a little bit of catch up on behalf of the government and small businesses and landlords to try and resolve some of these issues a little bit more amicably, where they haven't already been resolved.
Jon Watkins 14:28 Okay, and is this an issue that affects some sectors? More than others?
Daniel Bellis 14:33 Yeah, definitely. I think if we think about the sectors that were affected most during the pandemic, you've gotta think about your your pubs, your retail, your hospitality, the High Street anything that was really relied on having a physical property and having people visit that property. They were probably the ones that suffered most but that doesn't necessarily mean to say that there won't be manufacturing sector businesses, for example, that haven't had the same issue or face the same dilemma. And it's important to stress that this new legislation that's come out in this new arbitration process, it isn't limited to any one sector. If you have qualifying protected debt, anybody can apply for this.
Jon Watkins 15:16 Okay. And you mentioned the new legislation there. The government says it's there to help resolve these issues around commercial debts accrued during the pandemic, which sounds like it's good news for businesses that want to move forward. But how exactly does it work?
Daniel Bellis 15:33 Yes, so this is for any commercial rent debt that was secured between the 21st of March 2020, and the 18th of July 2021 in England. The dates are slightly different for businesses in Wales, and Scotland has a slightly different scheme again, so it's worth checking, depending on where in the UK you are exactly, what those rules are. But if you have these qualifying rent related debts, and you haven't already come to an agreement with your landlord, then you can apply towards arbitration to try and reach a negotiated settlement between yourself and the landlord. Rather than go to the traditional fight out in court, which is not always a great position for many businesses to be in. The first step to take, if you're thinking of doing this is to effectively write a letter to the landlord. Now, it isn't as simple as writing a letter, unfortunately, it is quite prescribed in terms of what has to be in there. But there's all sorts of resources available, including on the FSP website as well to try and help you take that first step. Okay. And
Jon Watkins 16:39 Okay, and you mentioned those resources, if I'm a small business, and I want to find out a bit more, where do I go to do that?
Daniel Bellis 16:46 So the FSB's website, along with the legal advice line. So if you are an FSB member, you will have access to that legal advice line. They can put you in the right direction there, if you want to speak to a human being, there are guidance documents on the government's website as well, although admittedly, there can be a little bit clunky. But we are working on to try and get those resources available to small business, to try and make this process as simple as possible for you. The first step is really to get that letter in for your landlord, to your landlords. Or equally, actually, if you're a small landlord yourself, and you want to sort this out between you and your tenant, you can also apply for this as well. But it really is about taking that first step. And that's the most important thing here because there is a clock that is ticking on this. So you have to have completed that first step, either 14 or 28 days before the 23rd of September this year. That's because in order to apply for the arbitration process, you have to give a certain amount of notice for that first letter. So do not leave this to the last minute. It is worth checking on those websites, checking those documents and making sure that if you have these protected vent debts, then make sure you start the process sooner rather than later.
Jon Watkins 18:01 Okay, indeed, the clock is ticking Martin. Lucy. Dan, thank you so much for taking us through these key small business announcements and issues in the headlines right now, as part of our monthly small business round up podcast series, that was really helpful. Thank you also to our audience for listening to this episode, which was brought to you in partnership with Dell Technologies. While I have your attention, I would just like to remind you that you can subscribe to the first voice podcast to receive regular updates and guidance on the big issues affecting small businesses. And do please also remember that you can find a whole host of additional webinars, podcasts and other content on the First Voice website at firstvoice.fsb.org.uk Many thanks.
Unknown Speaker 19:03 This episode is in partnership with Dell Technologies. More Business Month is here, and Dell Technologies can help push your business further with top offers on PCs and monitors, plus savings on server storage and cloud solutions. Visit dell.co.uk