The economic impacts of the Covid-19 coronavirus outbreak are already beginning to hit small businesses and entrepreneurs across the UK. Encouragingly, help is being made available by policymakers – the question is whether it’s enough.
First, the bad news. Two-thirds of SMEs are now seeing significant pressure on their cash flows according to research conducted by the invoice finance platform MarketFinance. It says this is largely because businesses have been paying for supplies earlier than expected because of coronavirus-related stockpiling and fears about deeper disruptions to transport links.
In addition, many SMEs report payment delays on orders and work already completed. Three-quarters of business owners report invoices due to be settled at the end of February have not yet been paid, MarketFinance reports. Many fear these bills are unlikely to be settled before the end of March.
The effect of these challenges is that for many businesses, Covid-19 is rapidly becoming an existential challenge. MarketFinance’s research suggests a third of business owners fear they won’t survive until Easter if they are unable to secure additional finance to bolster their businesses. And as economic conditions worsen, and with the possibility of widespread quarantines implemented across parts of the country, worse may be to come.
“At the best of times, only around half of these businesses are cash flow positive,” warns Anil Stocker, the CEO of MarketFinance. “Businesses are feeling a palpable sense of helplessness and isolation and there is a lack of specific information on how to cope with the crisis.”
Did this week’s Budget offer enough support for such companies? Well, the new Chancellor certainly included a number of measures very specifically targeted at SMEs struggling with the impact of the pandemic:
- Help with sick pay costs. The Government has promised to cover the cost of up to 14 days of statutory sick pay for workers at SMEs with fewer than 250 employees, including sick pay for those advised to self-isolate.
- A business interruption loan scheme. This will support up to £1bn worth of lending to smaller businesses with the government guaranteeing bank loans to small businesses of up to £1.2m. Banks will be covered for losses of up to 80% of each loan.
- Business rates support. Business rates will be scrapped for smaller firms in the retail, leisure and hospitality sectors. This will apply to premises with a rateable value of up to £51,000.
- Cash grants for other small businesses. Those SMEs that already pay no business rates will be eligible for a £3,000 cash grant, worth a total of £3bn.
- Tax payment extensions. The Government has promised to scale up the Time to Pay scheme operated by HM Revenue & Customs, allowing businesses and the self-employed to defer tax payments.
To this list you can also add separate support from the Bank of England. Its decision to cut interest rates to just 0.25% this week will help some SMEs with lending exposures, but other measures are likely to have more impact. The Bank’s Financial Policy Committee, for example, has introduced measures to enable banks to lend more to SMEs.
All in all, substantial assistance is on offer to SMEs struggling with Covid-19. However, it will be crucial to ensure businesses know what is available and how to access it. And these support schemes need to be kept under review – and topped up where necessary as the crisis unfolds.