Thursday 23 July 2020 3:36 pm

Counting the human cost of Covid — and of leaving small business owners behind

Save our SMEs
Helen Brand is the chief executive of ACCA

The daily lists of cases, tests and R numbers tell a tale of the scale of the Covid-19 crisis, but they don’t always explain the full story of the cost on people’s lives. 

ACCA and the Corporate Finance Network (CFN) are running a tracker poll among accountancy firms representing more than 22,000 small businesses to measure how they are coping with the crisis. The hard, cold facts are that the levels of stress, anxiety and fear of bankruptcy are rising, not falling.

Among the results: 83 per cent of business owners are more stressed and anxious compared to 69 per cent a month ago; 33 per cent are not sleeping compared to 17 per cent a month ago; and 18 per cent feel unable to cope compared to eight per cent a month ago.

Read more: This government’s oversight risks destroying my business

The personal impacts were made all too clear in a call ACCA hosted with the Forgotten Ltd campaign, which supports small limited company directors, and the CFN, which speaks for independent accountancy firms, and individuals who run small concerns. These are sole traders or businesses employing just a handful of staff.

They are the kinds of micro-businesses which serve us, our families and our communities in a million different ways every day. They are vital cogs that keep the wheels of the economy turning. 

And they are suffering disproportionately in the days of Covid-19.

First, many businesses have simply stopped paying invoices as cash flow has seized up throughout the economy. Some businesses have even stated baldly that they won’t pay suppliers until the crisis is over. This attitude is killing businesses which trade from month to month with zero cash cushion to fall back on. If we are to “build back better”, surely we should encourage businesses to protect their supply chains as essential to their long-term success?

Second, micro-businesses have been left out of government measures to protect jobs and prevent bankruptcies in other sectors of the economy. About two million business owners who trade through a limited company and dividend income didn’t qualify for support, such as those which pay themselves annually on a PAYE scheme but missed the HMRC deadline, despite paying themselves within the eligible 2019/20 financial year.  

All too often, their only option in the face of a fall in revenue is to eat through savings or pension provisions, to take on more personal debt, or to close the business into which they have thrown their heart, soul and working life.

We heard powerful and upsetting testimonies on our call about people who have suffered sleeplessness, depression and relationship breakdown.

We heard of people who had fallen hopelessly into debt which they can never repay.

What we also heard loud and clear was that these people don’t want pity — and they don’t want hand-outs. They just want to be treated fairly. 

As Gina Broadhurst, co-founder of Forgotten Ltd, said: “We represent two million companies employing 7.5m people. We are not fat cats or multi-millionaires. We don’t want special treatment. We want parity with everybody else. We need the political will to change, to save businesses and jobs. This is taking a heavy toll on people’s mental health.”

The economy is opening up again, though slowly. For the first time in months there is a tiny point of light at the end of a long, dark tunnel. It gives people hope that they can survive. But they need practical help. 

There are plenty of proposals about what that help could look like.

ACCA contributed to the CityUK’s Recapitalisation paper which recommended ways to get cash to UK businesses and proposed policy to better prevent defaults. The Business Repayment Plan will convert government-backed business disruption loans (CBILS and BBLS) into a tax obligation which is repaid alongside other business taxes in a similar model to student loans. This will mean business debt pay-back will be proportional (or “means tested”) to the revenue they have been able to recover. This will prevent alternative lenders struggling with liquidity from having to enter debt recovery when businesses inevitably default on payment because they haven’t yet been able to reopen. 

ACCA is also helping lead the #LeaveNoBusinessBehind campaign, which is signing up professional accountants and offering bitesize training videos and written resources to help businesses understand why it’s important to plan and reforecast financially. ACCA also has an Memorandum of Understanding with the International Chamber of Commerce and supports its Save Our SMEs campaign.

There is a clear need for greater government support for the left behind. Accountants are joining the cause, and it’s time for policy makers to join them.  

But the need is urgent.

It is true that the government has done much to protect our economy throughout this emergency. ACCA has praised the government for its response in many areas, notably the furlough scheme. We welcomed the chancellor’s statement two weeks ago. There were lots of positives, including the £1,000 jobs retention bonus, VAT cuts, dining vouchers, and the £2bn fund to create jobs for the young. 

ACCA believes that the Treasury, working with HMRC and other agencies, can yet come up with a package to support what feels like a forgotten but crucial sector. Covid-19 has triggered plenty of creative ideas and solutions to save wide swathes of our economy. 

It’s surely time for small businesses to be included in this national effort.

Read more: Left out in the cold: The company directors who have fallen through the cracks in the Treasury’s support schemes

Main image credit: Getty

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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