Welcome steps – but speed is the key to SME survival

Adam Stronach, partner and head of corporate finance at Harwood Hutton, gives his reaction to the latest government measures aimed at helping businesses through the Covid-19 crisis

While extra tax reliefs and grants are always welcome, I can’t help but feel for all those businesses facing sharp downturns right now who are desperate for urgent cash facilities. Quite simply, the authorities and the banks cannot react quickly enough to needs which are becoming more extreme day by day, in certain cases.

Yes, it is good news on business rates:

• a 12-month business rates holiday for all retail, hospitality and leisure businesses in England
• small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief
• grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000.

But just look at those businesses connected with travel, hospitality, and leisure. Saving on business rates is going to be a drop in the ocean if their customers cannot or will not use their services. The extreme impact on revenue in the next few weeks will almost certainly vastly outweigh any rates bill they can legitimately avoid.

The £330 billion Government support scheme sounds great too for large firms. The Bank of England will buy up their corporate bonds, providing them with precious cash flow. But those businesses will need to show they were in good financial shape before the onset of coronavirus. Terms will be comparable to those available in the commercial bond markets prior to the crisis.

For smaller firms, the business interruption loan scheme is to be expanded, with loans of up to £5m (last week the maximum was £1.2m) with an interest holiday for the first six months now available. I say “now available” but indications are it be rolled out from next week and there will be some delay for the necessary bank processes so those businesses can show they are a feasible lending proposition.

Therein lies the issue. On the ground, businesses contacting us at Harwood Hutton are desperate for these programmes to be available right now. Topline revenues for businesses are plunging fast in some cases. They need immediate direct cash flow help, otherwise, they may not be able to pay staff at the month-end. We are taking the first calls where owners are saying they have to stop or their businesses will go bust.

These are not bad businesses but in some cases, they are already looking at a 40% fall in turnover.

I would have preferred to see a cut in VAT, or HMRC offering not just Time to Pay arrangements but a tax holiday similar to the announcement of a mortgage holiday for homeowners.

A deferral period for paying PAYE / NI for small businesses would help them avoid laying people off in some cases while relieving the pressure on cash flow. It could be coupled with an offer of generous Time to Pay arrangements by HMRC, repaying the deferred PAYE and NI collected over long timescales.

I am most concerned about the prospects for the self-employed, many of whom have no financial cushion on which to fall back. They may find themselves having to balance health over livelihood, which is a choice no-one in our country should face, and they may need, quite frankly, some form of immediate state support to keep them going.

Accessing benefits the traditional way is going to take too long for a set of people who often work on a just-in-time basis for cash flow earnings they then use to fund their households week to week. These are people who often do not have the sophisticated management information set up of larger firms.

Perhaps the authorities can go further. Look at the United States where Treasury Secretary Steve Mnuchin says he supports sending money directly to Americans as part of the stimulus package there. Surely the UK Government has to act now to offer the same to its citizens.

The message from the business world that the Government needs to hear is this: Give us easy access to cash. Fast”

ABOUT THE AUTHOR: ADAM STRONACH

 Adam Stronach is a partner and head of corporate finance at Harwood Hutton, a UK Top 75 accountant, tax and business growth adviser with offices in central London and Beaconsfield. He is also a non-executive director at Buckinghamshire Business First. For more information, contact Adam on 01494 739500 or at adamstronach@harwoodhutton.co.uk