Over the last few months, the support provided by the Government to UK businesses, including these SMEs has been unprecedented. These measures have included; the Cororonavirus Job Retention Scheme (CJRS) Statutory Sick Pay, deferring VAT payments and self-assessment payments, business rates relief, and Coronavirus Loan Schemes.
However, moving forward, as the furlough scheme tapers off, VAT and self-assessment deferred payments need to be made and interest becomes payable on Government-backed loans, there is expected to be a significant cash crisis facing many businesses.
The situation is made more complex by the level of uncertainty now arising from many interconnected factors:
- How each of the four nations will respond to Covid-19 and what are the implications of this on businesses reopening, particularly national businesses with parts in each? This will be affected further if there is a second spike in infections in different nations and whether/when a suitable vaccine can be discovered.
- How will the future pattern of Covid-19 in other countries affect trade and travel? We are already seeing several airbridges being stopped because of localised outbreaks.
- To what extent will recent changes become more permanent and what will this mean for business? For example, with more remote working and less work-based travel will there be more sales made online and changes in purchasing patterns, e.g. more local sourcing of goods.
- How will Brexit and changes in international trade affect supply chains and selling goods and services into key markets? Will we agree a new trade deal with the EU in the remainng months of this year?
- Will the performance of the banks and, possibly, the level of the Government’s support to them impact their approach to assisting companies in difficulty?
- The UK has now officially entered a recession, how will the shape and length of this impact recovery. Whether the recession more closely resembles a U, L or V shape will depend on the extent of job losses and liquidations that occur in the UK and abroad given the traditional openness of the UK economy.
The critical elements in the Government’s response- proposed 5 point plan
Due to the substantial support provided to businesses in the UK, there is no doubt that the approach of the Government will have a defining impact on the success of the business, including SMEs, in the coming years. We believe this should include:
1. The development of a new national business strategy by the Department for Business, Energy, and Industrial Strategy (BEIS).
To do this, will call for closely working with the business community, banks, other capital providers and professional advisers; employee representatives; those of the education sector, and others who play a key role in the development of the economy.
2. The development of regional business strategies.
Regional growth and leadership plans should be developed in a manner consistent with the national business strategy. Their preparation should involve the elected authorities in each region and regional representatives of the other key stakeholders set out above, including those from Local Enterprise Partnerships and Chambers of Commerce. Regions should establish centres of excellence in sectors in which they have a leading position nationally or internationally bringing together all key players to work together, around a hub of Innovation Leadership Parks. This would be to leverage their strengths in order to create more world-class businesses of different sizes spread around the country.
3. Consideration of the establishment of regional development banks/building societies under a national structure to take equity stakes in viable businesses with Government loans/debts.
There has been a substantial increase in debt in the private sector due to Government loans and payment deferrals. In determining the way forward the Government should establish a Government and Corporate Partnership Commission, under a leading figure from the business or financial communities, to undertake the study. Consideration should be given to setting up a structure of regional banks/building societies under a national structure headed by the British Business Bank or other appropriate institutions.
4. A new approach to workforce education.
A wide review should be undertaken of education and development relating to those either in work, due to enter the workforce or made redundant for whom additional education would help them find a new role. In all cases, the aim should be to help employees achieve their full potential and lead fulfilling lives. Diversity, inclusion, and social mobility should be a focus with particular regard given to issues related to ethnicity, gender, and other personal characteristics. Closer links should be established between businesses, universities and further education colleges and a lifelong approach to learning supported.
5. Thorough taxation review to support the implementation of national and regional business strategies.
A thorough taxation review should be an integral part of supporting the successful implementation of national and regional business plans. The tax code provides a powerful set of incentives and it is key to align these with the national and regional business strategies with a particular focus on creating a sustainable economy and vibrant SME sector
2020 will clearly mark a defining year in our national and corporate life, possibly for decades ahead. We have a chance to reset our business strategy as a nation for the 21st century. We should seize it and create a successful economy that is sustainable and serves all.
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