By Simon Dolan, Founder of the ‘Fighting Back for Business’ Campaign.
UK businesses are hanging by the skin of their teeth. Just last week the Federation of Small Businesses (FSB) reported that at least 250,000 small businesses will collapse in 2021 unless more support is offered to them under the current restrictions. This would bring the total number of SMEs that have folded since the start of the Covid-19 pandemic to an estimated 470,000.
Accounting for over 50 percent of private sector turnover, these crisis-hit SME are engines of growth that lead innovation and provide new sources of employment, so it is imperative they are protected. Time and time again these businesses have dusted themselves off and started again, constantly adapting their business models to keep operating in the most challenging of circumstances.
Now, with the 12-month interest-free period on emergency Covid loans about to come to an end in March, businesses already hanging by a thread are about to be hit with the crippling burden of having to start paying these loans back. With banks charging up to 35 percent on the loans, experts have warned that the resultant financial crisis will be significantly worse than 2008.
In total, SMEs have taken out £68.2 billion in loans since the start of the pandemic, through the Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS). Someone who borrowed say £25,000 to survive in lockdown could now find themselves having to pay over £500 per month repayment, all of which is to be repaid out of post-tax profits. These ‘profits’ are currently impossible to make because of the Government restrictions and are to be paid on top of what will already be a much higher tax rate.
It is frankly unjust for these businesses to ruin themselves financially just to pay back debt which was thrust upon them by a completely inept and shambolic Government, especially when they were under the impression that they would be back in full operation within months. The devastating repayment rates will cause further irrevocable damage to the very businesses which have fought tooth and nail to keep our county afloat. This will only impede the
speed and scale of our nation’s economic recovery and put thousands more jobs at risk.
The stark reality is that hundreds and thousands of businesses are on the brink of collapsing and even the minimum loan repayments will cripple SMEs, driving them to inevitable bankruptcy later down the line.
With the nation still yet to feel the full financial impact of the pandemic, now is the time to pull together and support the individuals who have poured their blood, sweat and tears into these businesses to keep them afloat and provide for their families – not to weigh them down with utterly unreasonable debts. For the UK to be able to have a chance at moving forward from this pandemic, and for the job market and economy to be able to recover at a decent pace, the loans taken out by the 1.5 million struggling SMEs must be scrapped.
Writing off these loans will cost approximately £68.2 billion. In 2008 the Government bailed out the banks without a second thought. Offering SMEs this same treatment will not only expediate the recovery of the job market and the economy, it will also save the livelihoods of thousands of people. As it stands, around 6 million SMEs in the UK are struggling to survive, and these businesses support over 16.6 million jobs. Enforcing absurd repayment fees will only accelerate this demise and increase unemployment figures.
Back in June, before the second or third wave of the pandemic were on our radar, there were already calls for all emergency Covid-19 loans to be written off. Now we need to see rapid and decisive action from the Government to stop these ludicrous interest repayments from causing further devastation to already vulnerable businesses. SMEs are the backbone of our economy, and they must not be swept aside as collateral damage amid the Covid-19 pandemic.