At the kind request of the editor, this is Classic Canes’ experience of the coronavirus crisis so far, highlighting the urgent need for support for the owners of small businesses.
Classic Canes, walking stick and seat stick supplier to many of Equestrian Business’ readers, is a typical small family business. There are two directors (me and my mother) and six further members of staff. It also has to support my father, who is retired. Established in 1982, we have weathered many recessions and have built a very solid, niche business in that time.
Charlotte Gillan
The change from our happy existence to the current situation was very sudden. On March 11th, I took delivery of a lovely new company car and all was well. By March 18th, we realised that even the ‘worst scenario’ cashflow forecast showing a 90% drop in sales was optimistic and I had to tell the employees that they would have to be laid off. Most of our customers have closed their shops and so our sales have all but ceased, with only a few orders coming in from online retailers and export customers.
I appreciate that the government, like the rest of us, is making it up as it goes along in this unprecedented situation. However, at the time of writing, the lack of support for owners of small businesses is conspicuous and short-sighted.
Our bank manager has informed us that we are unable to access the Coronavirus Business Interruption Loan Scheme because a) our business has an overdraft facility already in place, on which of course we will have to pay interest to the bank, and b) our bank is not a member of the British Business Bankers group so cannot access the funds in any case. Many of our customers have found themselves in the same position.
So far, there is no income support whatsoever for small business owners, in contrast to furloughed employees and many self-employed people. We take a very small salary out of our businesses and top up our income with dividends. The dividends are not taken out in one lump sum but withdrawn monthly so the businesses can have the use of our money until we need it for personal expenditure. Those dividends are now being swallowed up by the costs of running companies with virtually no money coming in. When the money runs out, small business owners will have no further income.
Everyone needs to see their incomes protected at this time, but small company owners are of particular importance to the wider economy and it would be to everyone’s benefit for this group to receive comparable support soon.
There are 5.8 million small and medium sized businesses in the UK*. This is 99.9%* of all the businesses. Collectively we are by far the biggest source of employment in the country. We hear a lot on the news about large companies such as Virgin and Wetherspoon, but they are a drop in the ocean compared to the numbers of jobs that will be lost if the government doesn’t do more to help small businesses fast.
Our employees are furloughed, which has been a great help short-term but the plan is full of flaws. Currently, the taxpayer is paying 80% of these people’s wages for them to be economically-inactive at home. Furloughed employees are not allowed to help their struggling employers, reducing the chance that those employers will survive to give the employees a job to return to.
Business will not suddenly bounce back at the end of May when the furlough system is provisionally due to end. If businesses cannot afford to bring their staff back, they will have to make them redundant. Jobs will be lost and undoubtedly companies too as the burden of redundancy payments will finish off many employers who otherwise could have made at least some jobs available.
Even when we are in a position to bring employees back into work, it won’t be the case that they can all suddenly come back on their old hours on full pay. The businesses won’t be able to support that. The government either has to top up employee’s incomes so they can work part time, or overhaul employment law so companies can shed the workers they can’t justify without being crippled by redundancy payments. Otherwise, companies that could have employed a few people will be forced to close and therefore employ nobody.
When this is over, the government will need the country’s small businesses in order to provide both employment and tax revenue. If we are burdened with massive loans, overdrafts and payments to employees, it will be a long time before we can trade at a profit. The government can’t tax losses, so the economic priority has to be to help these companies stay trading profitably so we are here to help the country out of this financial black hole.
I just hope there are brainy people in the Chancellor’s office explaining this to him.
*SOURCE: FSB website