Despite my strenuous efforts to find some help (submitting evidence to the Treasury Select Committee, writing to the chancellor, the economic secretary to the Treasury, the Welsh secretary, and the first minister of Wales), this government stands on the brink of bringing my business down.
My business was not “in difficulty” before Covid-19 struck, it does not need to fail, and it certainly does not deserve to fail.
But, by adopting an entirely inappropriate EU rule for its Coronavirus Business Interruption Loan Scheme (CBILS), this government is putting my business — and many other businesses like it — in extreme difficulty which is likely to result in more unnecessary business failures and job losses.
I started my company 25 years ago as a twenty-something young woman without any business training, no real money to my name, and in a sector where female entrepreneurs were close to unheard of. I just did what so many others have done — I had an idea and followed my gut.
Over the next 18 years, my business grew into a highly profitable tour operator, at its peak carrying 60,000 customers on holidays throughout the UK and Europe. But that growth often came at great personal cost as I tried to run the business and bring up my son from within a very difficult and damaging marriage.
In 2013, that all changed as I finally broke free of my marriage. Adapting has not been easy, and in the early euphoria of freedom, I made some big mistakes with the business. Chief among those was my investment in a retail operation which I have since spent three years putting right. That’s how it is in business, I suppose: not every decision turns out to be the right one.
I sold or borrowed against everything I had to fund my turnaround plan. The associated emotional and financial pain has often been indescribable, but I fought all the way and never gave up. By the second quarter of 2019, my team and I had successfully come out the other end.
The underlying business is now more solid than it has ever been. Over the last three years we have regained control of our cost base and removed the damaging distractions of our retail operation — and, in the process, I have learned many valuable lessons.
Throughout the turnaround, our core tour operation remained profitable with a sustainable EBITDA of around 7.5 per cent of sales — well above average for our industry. Our expectations for 2020 were even better based on our forward order book and actual trading performance in the first two months of the year.
Then Covid-19 hit, and 2020 has been decimated.
To mitigate the damage caused by the pandemic, I applied to our bank for a CBIL for just under twice the value of my sustainable EBITDA based upon a range of business restart scenarios. After credit assessment, our bank backed us and made me an Offer in Principle. However, it also told me that it could not actually lend under the CBILS because my business is classified as an “Undertaking in Difficulty’ by EU state aid rules — my accumulated losses are more than 50 per cent of my issued share capital.
I covered those accumulated losses by personally funding the turnaround through share capital. But I had not added an extra 50 per cent on top and I cannot imagine any privately-owned business like mine that would, even if they could raise the additional funds. I no longer have the security to offer for a “business as usual” loan because all my assets have been sold or otherwise pledged to support the business through the turnaround. I am out of options.
The government did not have to apply these state aid rules. It could have asked for them to be waived by the EU, but it did not.
By choosing to apply them, the government has effectively shut out any SME that has been through a successful recent turnaround. The impact of this choice will be my business and many other viable businesses like mine going to the wall over the coming weeks, with even more jobs and livelihoods being lost.
To add further irony to the situation, I now understand that I could have undertaken a capital reduction last year to eliminate the accumulated losses from my balance sheet. It would be the same business now, but without the imminent risk of failure, job losses and bankruptcy because “the computer says no”.
Where is the sense in that?
I have learned that you need to be a fighter to run your own business, and I suppose that I have been fighting one way or another all of my life. Having come so far and done so much to get my business back on track, to have the rug ripped from under me now is painful beyond words.
I am not beaten yet, but I am close. This government has both the power and responsibility to ensure this is not the end. But it must act now.
Main image credit: Getty