Coronavirus: What Business Needs From Government Now

There is little need to outline the difficulty businesses face in the present coronavirus pandemic. While the UK and devolved governments have issued wide-ranging and comprehensive support packages for business, recovery—as with the normal running of society—still lies beyond the horizon.

From the off, the DMA and wider business community has been working with UK and devolved governments to relay feedback and concerns about the schemes that have been made available to help businesses through the coronavirus pandemic. While some schemes have been successful and widely used, there have been substantial issues with many of the policies – particularly the structure and accessibility of the Coronavirus Business Interruption Loans (CBILS), which was intended to be a central lifeline to all businesses at risk. Many changes to CBILS and additional schemes have had to be made to plug the gaps where business could not access the help it needed.

In fairness to the government, in ordinary times, policies of this magnitude would be subject to months of parliamentary scrutiny, expert examination and amending prior to implementation.

It is necessarily the case that the speed at which the cannon of coronavirus response policies were designed and offered means any shortcomings have to be amended on the hoof.

However, the fact that it has taken over five weeks (and counting) for the UK government to continually improve their business support policies offers a lesson: in times of crisis, effective government support will not be instantly available.

This is particularly notable given that the UK Government has been wargaming and planning for an economic shock—in the form of no-deal with the EU—for over a year. It is reasonable to expect that there would be learnings from war-gamed economic downturn scenarios and identification of vulnerabilities of the UK economy that could be applied to the present situation. After all, the universal need of businesses in any downturn is the quick access to cash in lieu of lost income.

Indeed, in the digital and data industry—which is less-affected than many others—DMA research tells us businesses estimate to be operating at just over half (56%) capacity, with consequentially crippling effects on revenue. Businesses surveyed identified access to cashflow as their biggest need.

In spite of this, when compared to most major EU economies, the UK has been slowest to issue money to businesses through coronavirus help schemes. This is not for businesses’ lack of awareness of the schemes (81% aware of government help available) or attempts to access the money (74% either have or intend to use the schemes). 57% of businesses surveyed by the DMA say the government still needs to do more to help.

Most businesses, large and small, do have some cash in reserve to tide them over until they can receive government support. But this is not the rule of thumb, and nearly all cannot sustain themselves for long. DMA research tells us many businesses don’t have reserves to last more than three months; most not beyond six.

Of course, these stats reflect the situation here and now.

The fact is, businesses reserves are being depleted day by day and, some months down the line, few will have the war chest necessary to tackle an economic blip, let alone a prolonged slump or crash. 83% of businesses are still concerned about the impact of coronavirus, with 94% anticipating further negative impacts on their business.

What does this mean going forward?

First, the government should outline a long-term extension of the furlough scheme, providing options for employees to be furloughed on a part-time basis and for a gradual phased reduction of the scheme over a longer period. Businesses will need time to build opetations and reserves back up, and, if done well, the furlough scheme can be a key ally in funnelling capacity back into business as needed.

Second, the government needs to make further improvements to the CBILS scheme. This week, 47 MPs signed a letter outlining the need for more banks to offer revolving finance or overdrafts as part of their loan offerings. Doing this will help businesses who may need a further temporary cash boost to the CBIL loan they receive. As importantly, they need to work with banks to improve the approval rate, which sits at just over 50%.

Third, the government should extend business rates relief to as many businesses as possible, or implement a blanket business rates holiday as has been implemented in Northern Ireland. This will allow businesses to free up cash previously allocated for business rates for more immediate needs.

Finally, the UK Government must strongly consider how it can protect the economy from future downturns. Business resources will remain depleted for some time, and precious few businesses would survive economic downturn—no matter how small—from the UK breaking ties with the EU on 31 December. All options should be examined, including extending the future-relationship negotiation period and pursuing a closer-aligned relationship with the EU.

Taking these steps would not only support business in the immediate term but help restore trust that the economy will be protected in the long term.

Lobbying successes so far:

• Changing Coronavirus Business Loans Scheme to remove personal liability for loans under £250k
• Extended availability of CBILS Scheme to greater number businesses
• Obtaining 100% government-backed loans of up to £50k through Bounce Back Loans Scheme
• Additional funding and accessibility for small business grant scheme
• Extended Self-Employment Income Support Scheme to directors and those who are paid via dividends