Azets urges Chancellor to support business and deliver growth across UK
Ahead of the Spending Review, accountancy and business advisory firm Azets is calling on the Chancellor to take five practical steps that will support business and help deliver growth across the regions.
Fraser Campbell, head of UK accounts and business advisory services, at Azets, said: “SMEs are at the heart of UK business. They employ one in every two people in the UK and are the foundation of tomorrow’s business champions. Many SMEs are run by individuals and families that have put huge effort and risk into building their business. For the most part, those are viable businesses that could prosper in the future. For that to happen, all they need is the right targeted support to take them through the pinch points of the next few months.”
Azets has said it is key for the Chancellor to act on the following, as part of this spending review:
- Address the issue of the forgotten 3 million before it cascades into wider business failures and impacts employment
- Support the young, whose skills will be key to supporting business in the future and have been disproportionally impacted by the pandemic
- Incentivise urban regeneration, before hospitality and retail becomes irreversibly damaged, driving long term change to our city centres
- Reinstate the ‘Job Retention Bonus’, on which businesses based their budgets, in order to prevent a cash crunch and stalling business in early 2021
- SME recapitalisation plan, to enable business to grow and not stagnate, supporting the public purse, employment and growth through access to funds
Carina Contini, director, Contini Restaurants Edinburgh, added: “Many hospitality, as well as other similar businesses, are in desperate need of finding ways to preserve cash, so they can avoid a potential cliff edge early next year, post what is looking like a challenging Christmas trading season. What’s needed now is a deferral of corporation tax, due in January, extend rates relief, a further moratorium on rent and an extension to the 5% VAT levy. A longer term look at VAT would help the industry properly back onto its feet.”
“What we are talking about here is not faceless organisations but family businesses, built on years of hard effort and risk. Should they fail the impact on local communities will be immense. They employ and train local people, keep an army of local producers and suppliers going and, in many cases, are the vibrant centre to the community and its way of life. We simply have to act now before it’s too late as once these businesses are gone the impact will be felt for a very long time.”
Support for the forgotten 3 million
The 3 million limited company directors and freelancers who cannot benefit from furlough are desperate for some form of meaningful support. Failure to address this risks many smaller businesses cease trading, as owners face possible personal bankruptcy, leaving employees without a job and potentially wasting millions invested in retaining jobs through the furlough scheme to date.
Support the young
Power up the kickstart scheme. Young people need to have relevant and up to date skills to enable business and regions to prosper. They are the future of this country but are disproportionately impacted by the pandemic, putting their future and the future of regional business at risk, through skills shortages created by extended unemployment.
Sector specific targeting, under the Kickstart scheme, holds the key to potentially overcoming many of the issues currently facing the under 25s. Sectors include growth areas, such as technology, manufacturing and industry. Enhanced support for those sectors that will revive in time, such as hospitality, travel, tourism and general leisure, should also be included.
Currently the Kickstart scheme is broad in scope, targeting employment of under 25s, so long as they’ve been on universal credit prior to employment, regardless of sector and it prospects.
Establish urban regeneration plans & funds
Without support now, we threaten long-term damage to urban infrastructure, along with the businesses and sectors they are based around. This risks having a material impact on our city centres and way of life.
Urban regeneration can be achieved through incentivised targeted funding support for hospitality & retail businesses, enhanced tax breaks to repurpose buildings, for mixed residential, retail, hospitality and commercial use, and super enhancement where this offers low cost social housing.
These initiatives will breath much needed new life into urban areas; attracting new and different groups of people, more than offsetting the loss of footfall from changes in working and shopping habits, and creating interesting and vibrant places for people to spend time.
Reinstate the Job Retention Bonus
The job retention bonus was central to the planned budgets of many SME businesses, allowing them to retain more employees then they would have done, pay overheads and keep the lights on while restrictions remain.
The removal of this support scheme potentially places many SMEs on a knife edge; when combined with a challenging Christmas trading period, a difficult first quarter and deferred tax demands, along with other foreseeable cash constraints.
The hospitality and retail sector are amongst the most exposed but there are many other sectors and individual businesses that will struggle during this period due to no fault of their own.
Planning is key for business. Without planning business owners can’t manage their supply chain, cost base, operations or their sales process. Stability in the regulatory and support framework within which they operate is a key for them to be able to navigate through this period.
SME recapitalisation plan
Many businesses, post the pandemic, will be unable to attract investment and grow, potentially impacting employment, regional growth, productivity and ultimately living standards.
SMEs now have unparalleled amounts of debt, with recent figures suggesting the levels of business borrowing has increased five-fold this year, to £43.2bn. At these levels, many businesses will be unattractive to equity investment and have limited scope to take on additional debt for investment.
Repayments on government support loans starting in the second quarter of next year will likely exacerbate the situation, further stretching cashflows and working capital. For many businesses, it is simply too early to see additional cash flowing out of the business, with the lingering effect of trading under the pandemic still being felt.
Plans need to be put in place now to help manage this debt if we want to see these businesses thrive and drive growth next year and beyond. Plans need to be more than payment holidays, which only serve to store up future problems. They need to be a long-term solution, based on rebalancing these companies.
Establishing an equity fund, with government support, to specifically recapitalise SME businesses that are viable but over indebted as the pandemic eases is a clear solution. It not only favours business, it offers the opportunity to repair the public purse. Incentives could be further enhanced through tax breaks for equity investment where is replaces government supported debt.