Says Liz Barclay Vice Chair of the Financial Inclusion Commission
On the 26th November 2020 the Financial Inclusion Commission hosted a roundtable to discuss how to help small businesses around the UK deal with their financial woes and get recovery ready.
We also produced a discussion paper in September this year with debt charity The Money Advice Trust which runs Business Debtline, setting out what we felt were the main issues small businesses are encountering. In that we suggested:
- Swift action with either insurance or assurance of help from Government to deal with the interruptions that they will see in the years to come.
- Action to strengthen the Prompt Payment Code further, to introduce fines for persistent late payers, and to review the use of statutory interest on late payments.
- Help to defer repayment of government-backed loans, where needed, without increasing their debt and more accessible, affordable credit.
- A collaborative approach by the regulators, requiring the industry to guarantee access to and acceptance of cash, and provide the regulatory framework to enable effective collaboration as well as requiring payment providers to implement Request to Pay and auto-enrol customers.
- Further support to ensure digital access and better digital banking and payments products which meet these needs, at costs affordable for small businesses.
- Support and training to help small businesses adapt to the increasing digitisation of the economy and assistance to train and upskill the workforce and contribute to job creation.
- A fundamental review of how small businesses and the self-employed are taxed with a view to achieving a system which does not lead to significant costs for small businesses.
- A sustainable long-term pension solution with ways of providing adequate advice and of engaging small businesses and the self-employed in planning their financial future.
At the ensuing roundtable on the 26th November Matt Hartley from the Money Advice Trust outlined just how tough small businesses are finding it financially. One of the most worrying points he raised is that small business owners have been trying to keep their businesses afloat using money that would normally be reserved for paying the household bills. As a result twice as many households had fallen behind with personal credit card payments or council tax as far back as May as were behind with business bills.
He also pointed out that 72% of people surveyed earlier in the year said late payments were making financial problems caused by Covid-19 worse.
Philip King, Interim Small Business Commissioner told the audience that getting a payment on time can mean the difference between being able to feed your family or not, and the implications for mental health of small business owners are horrendous. Philip has written a blog for the FIC which you can find here.
We need our small businesses to survive and drive the recovery. They are the backbone of the UK economy with 5.9 million small businesses employing about 60% of the workforce pre-covid. They are the innovators and entrepreneurs who take risks and create jobs.
Miles Celic is CEO of TheCityUK, set up 10 years ago to represent UK-based financial and related professional services. The organisation is working on an ecosystem recovery plan for cities across the UK. Miles is pushing for various support mechanisms for small businesses: “There’s no point in supporting them through the crisis only to pull the plug on them later on, because that’s hugely damaging to the companies, the people who work for them, the communities they support, and to the tax payer more broadly.”
Over the next year at the FIC we’ll continue to investigate the financial issues faced by small firms.
In the meantime Money Advice Trust launched a new report on Tuesday 8th December called Back to business: Supporting people in self-employment to bounce back from Covid-19 which includes predictions from self-employed people about their longer term recovery from this crisis and that of their business. I have to declare an interest here. I have been an ambassador for the Money Advice Trust for years. It does remarkable work.
Business Debtline helps the people who sit behind those numbers – those in the hospitality industry whose jobs have disappeared, taxi drivers whose custom has dried up, bar owners who have lost all their trade overnight. If you know someone who needs their help find them online at https://www.businessdebtline.org/ or call 0800 197 6026.