Spring Budget: What do the UK’s SMEs need to survive the pandemic?

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Later today, Chancellor Rishi Sunak will deliver his Spring Budget to Parliament – and thousands of businesses and entrepreneurs are awaiting what support they will be getting to support employees and the wider economy for the foreseeable future.

As a part of this, Business Leader spoke to some industry experts on what SMEs will be looking out for during today’s announcement.

Alan Thomas, UK CEO, Simply Business, a UK-based provider of SME insurance, comments: “Almost one year on, the coronavirus pandemic continues to impact all of our daily lives. Few have been hit harder than the self-employed – livelihoods are on the line, meaning small business owners are facing unprecedented pressures. We know from our own research that a third of SMEs have had to close since the pandemic began and estimate SME’s total economic fallout from Covid-19 will be in the region of £70bn – a hammer blow not just to the small businesses themselves but also to the UK economy to which they’re vital.

“Put simply, the UK’s six million small businesses – which pre-Covid-19 were contributing £2tn annually to the UK economy – should be placed at the heart of our economic recovery plan. So as The Chancellor puts his final touches to this week’s Budget, we would advocate for even more support for SMEs and the self-employed. With lockdown restrictions set to continue until at least June, now isn’t the time for an end to lifelines such as Business Rates Relief or the Self-Employment Income Support Scheme. Instead we would urge The Chancellor to help small businesses survive and thrive – not doing so risks stunting our overall economic recovery.”

Kate Hardcastle MBE, an independent business expert, said: “SMEs have demonstrated their resilience and entrepreneurism to survive a chaotic time, but they still need support to come out the other side of this pandemic. In this Budget, SMEs will be hoping for continued Government support to help them get through the coming months.

“However, while there is certainly cautiousness about the months and even years ahead, the latest Barometer data from Barclaycard Payments suggest that there are stirrings of hope and a growth in optimism over the last four quarters, which could mark a significant turning point for many businesses.”

Luke Davis, CEO of IW Capital said: “Throughout the year we have seen such a fast injection of cash into SMEs in the form of Government-backed loans, that are simply not tailored to the business’s growth trajectory. This has therefore left these businesses in a worse off position than before, as are now drowning in debts that they cannot pay off. Yes, the Government has introduced schemes that aim to aid the repayment of these loans, but overall they will just delay the inevitable unless we see a more practical solution.

“Funding from private investors will be a key part of our economic recovery and the success of small businesses that were previously creating jobs at a rate three times as fast as large firms. Private debt is much more manageable and flexible than Government debt, so encouraging investment into these businesses is something that needs to be promoted and supported in the upcoming budget.

“In the budget, we need to see more practical support needs offered to businesses, too many have been overlooked and we are now seeing the shortcomings of the Government’s Covid relief strategy.

“Private capital has proven to be fundamental in helping UK businesses weather the storm, and recover and grow post-pandemic. Investment into UK SMEs, and the extension of EIS and loan support schemes, would be far more efficient than any Government loan scheme and vital to the resurgence of the UK economy, with the SME community making up 99.9% of private sector businesses.”

Simon Dolan, a serial entrepreneur and signatory to the “Fighting Back For Business” campaign letter said: “SMEs are the lifeblood of the UK economy and have been consistently overlooked during the Covid-19 pandemic. Millions of businesses have admirably navigated the turbulent waters they have found themselves in during the last 12 months and deserve to be supported in their road to recovery.

“Not a single business would have wanted to take out these loans, and many did so under the assumption that they would be trading once again within a couple of months, not still waiting for clarity and certainty a year later. The Chancellor’s “Pay as You Grow” initiative represents nothing but lip-service, with SMEs still being left with cumbersome loan repayments, stifling their growth and recovery within a few months.

“It is time that the Chancellor listens to the voices of actual businesses across the UK. The first step towards a thriving economy post-coronavirus hinges on businesses still being open, and ensuring they are not weighed down by looming loan repayments will be vital in countering the possibility of unparalleled insolvency figures.”

Jonathan Richards, CEO and Founder of Breathe comments: “Although the roadmap out of lockdown has been announced, small and mid-sized businesses everywhere will be anxiously monitoring the budget tomorrow and waiting for news of further COVID-19 support, after what has been a particularly tough year for businesses in the hospitality, leisure and retail sectors. The proportion of private sector workers on furlough is at its highest level since last summer, so it’s critical that the Chancellor announces measures to support businesses and their people as restrictions gradually begin to lift. Extending the VAT and business rates relief will also be welcomed by many, providing vital assistance to get back up and running.

“Providing strong support to businesses will not only enable them to thrive; economic support from the government will allow them to focus on their people and nurture a strong company culture. Building an inclusive culture will retain top talent and allow businesses to embrace both the challenges and opportunities of Brexit with ease.”

Stats show SMEs are getting ready for recovery

Ahead of the Budget, research from Barclaycard Payments SME Barometer finds that SMEs are already getting ready for recovery and are feeling cautiously optimistic about the year ahead:

  • The recent roadmap and speed of the vaccine roll-out might mean that the outlook is better than many SMEs had expected. When polled in January and February, just over a quarter (27 per cent) expected the restrictions affecting their businesses to end by April 2021, rising to just under half (49 per cent) by June 2021.
  • SMEs are still weary of continued upheaval, and are braced for further short-term losses, anticipating an initial revenue drop of 7.5 per cent over the first three months of this year.
  • However, SMEs expect to see 8.1 per cent revenue growth in 2021, as vaccination programme continues to roll out at pace. Nearly four in ten (39 per cent) say they are optimistic about their business prospects.
  • While SMEs await news on the furlough scheme, 30 per cent are already planning to hire new full-time employees over the next 12 months, while just under half (49 per cent) plan to keep current staff levels.
  • A quarter (24 per cent) say their output has already surpassed, or returned to, pre-pandemic levels seen at the start of 2020, though caution remains about the months ahead.
  • The quarterly Barclaycard Payments SME Barometer also shows business sentiment is starting to look more positive, at 98 points out of a possible 200. While any score under 100 indicates negative sentiment, this is the highest score reported since the beginning of the pandemic. Sentiment has risen steadily over the past three quarters from a low point of just 79 points in Q2 2020 compared to an initial pre-pandemic high of 110 in February 2020.

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