Business Review October 2020

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BUSINESS REVIEW Spotlight on issues affecting business

Winter Economy Plan Tackling late payments Bounce Back Loans Family firms ‘protecting jobs’ Flexible productivity boost Other news How the UK’s small businesses are adapting to survive Job Support Scheme expansion

October 2020

BUSINESS REVIEW

Winter Economy Plan

Tackling late payments

Bounce Back Loans

Chancellor Rishi Sunak has set out a series of measures aimed at halting job losses and stemming business failures as part of his Winter Economy Plan.

The government has opened a consultation on expanding the Small Business Commissioner’s powers, as part of plans to create a prompt payment culture in UK business.

The National Audit Office (NAO) has warned that up to 60% of emergency loans distributed under the government’s Bounce Back Loan Scheme may never be repaid.

According to research conducted by the FSB, each year around 50,000 small companies are forced to close due to problems stemming from late payments. Estimates also suggest a total of £23.4bn was owed to small and medium-sized businesses in late payments last year, with this figure believed to have increased during the pandemic as larger companies have delayed payments to conserve their own cash.

Bounce Back Loans were designed to provide small businesses unable to obtain other pandemic-related funding, access to money quickly to help them survive the COVID-19 crisis. As a result, applications incurred lighter checks than other schemes, thereby making them more susceptible to fraud, organised crime and default. In addition, the NAO said the speed with which the scheme was initially rolled out heightened the risk of fraud.

His statement, delivered on 24 September, was a last-minute replacement for the planned Autumn Budget which the Treasury had cancelled the previous day.

It was a decision taken to focus efforts on dealing with the short-term economic problems caused by the pandemic.

The centrepiece of the Winter Economy Plan was a new scheme to replace furlough, running from 1 November.

The Job Support Scheme will last for six months and see the government subsidise the pay of employees working for businesses that are operating but facing decreased demand. On 9 October, Rishi Sunak announced that the Job Support Scheme will be expanded to protect jobs and support businesses required to close because of local or national restrictions.

And on 22 October, the Chancellor unveiled increased support for jobs and workers impacted by COVID restrictions.

Under the revised scheme, employers will pay less and staff can work fewer hours before they qualify for extra financial help.

Business Review

In its 2019 election manifesto, the Conservative Party promised a clampdown in this area and Paul Scully, the Minister for Small Business, has now announced details of new proposals designed to stop large firms taking too long to pay their suppliers.

Specifically, the consultation is set to consider whether the Small Business Commissioner should be given the power to order companies to pay in good time and impose fines if they do not, compel firms to share information on payment practices and to proactively launch investigations. The consultation will run until 24 December, with all interested businesses invited to share their views on the new proposals.

A recent investigation by the BBC has revealed how fraudsters have used the scheme to access loans of up to £50,000.

It unearthed evidence of over 100 bogus firms that scammers had established in order to make fraudulent applications using personal details stolen from innocent victims to set up fake companies.

It has also emerged that, two days before the scheme launched, British Business Bank CEO Keith Morgan wrote to Business Secretary Alok Sharma, warning that the scheme risked wasting taxpayers’ money as it was ‘vulnerable to abuse by individuals and organised crime.’ In total, NAO estimates suggest the taxpayer stands to lose up to £26bn on unpaid loans.

OTHER

NEWS Benefits-in-kind reforms

Quirky quote:

“If people like you, they’ll listen to you, but if they trust you, they’ll do business with you” – Zig Ziglar

Family firms ‘protecting jobs’

Flexible productivity boost

New research undertaken by Hitachi Capital Business Finance suggests small family firms are doing the most to cushion their workforce from the impact of COVID-19.

A new study suggests flexible working could potentially boost UK productivity as the traditional nine to five day does not cater for everyone’s needs.

With continuing fears over rising redundancy levels, the study found that traditional family-run businesses have been fighting the hardest to protect jobs during the pandemic. Indeed, while 46% of all small business owners said they expect no reduction in headcount across 2020, the figure rises to 57% for more traditional family-run firms.

The survey of 1,500 employees conducted

by Tic Watches sought to pinpoint the time of day workers typically feel most productive and creative. And, perhaps unsurprisingly, it revealed marked differences in patterns across different age-groups and professions.

In addition, the survey revealed that family-run businesses were more likely than the average small business to have given staff bonuses during lockdown, initiated one-to-one pastoral calls to support staff wellbeing and committed to improved sick pay for staff members who need to self-isolate.

Commenting on the findings, Jo Morris, Head of Insight at Hitachi Capital Business Finance, said: “Despite the greater challenges that family businesses have in adapting their businesses and in seeking finance, many have worked extremely hard since lockdown to avoid the painful process of letting people go. Our research suggests that caring and looking after people is often at the heart of their business. And this bodes well during a time of unprecedented economic uncertainty.”

According to the study, the average UK worker is most productive at 11:54am and reaches their creative peak at 12:42pm.

However, a sizeable proportion of younger people said they prefer working either earlier or later in the day – more than one in six millennials felt most productive before 9am, while a similar number said they were most efficient after 5pm.

Notable variations were also evident between professions. Accountants, for example, were found to be most productive at 9:48am, while for admin and office workers it was 11:42am, and 12.54pm for HR and recruitment staff.

New working arrangements in response to the pandemic have inevitably increased flexible working options for a significant proportion of the workforce. And these findings suggest that this could have a positive impact on productivity, particularly across those groups that perform best outside of traditional working hours.

The Institute of Chartered Accountants in England and Wales (ICAEW) believes the benefits-in-kind system is no longer ‘fit for purpose’.

With responsible employers increasingly offering employees a choice of working from the office or home, it fears the deductibility of expenses incurred by homeworkers may influence decisions.

The ICAEW has therefore submitted recommendations to HMRC outlining potential improvements to ensure the employee benefits regime adapts to post-coronavirus working practices.

Entrepreneurial spirit A recent survey by Direct Line has found that almost half of all young people have either established a new business since lockdown or intend to start one by the beginning of next year. These findings reflect the latest trends from Companies House data, which showed more than three times the average number of start-ups were registered between April and June of this year.

Track and trace QR code Businesses, places of worship and community organisations in England and Wales, with a physical location open to the public, are being encouraged to create and display a QR code for the NHS COVID-19 app.

A printable QR code can be generated via the government website, which also provides details of those organisations which are legally required to display an official NHS QR code poster.

October 2020

How the UK’s small businesses are adapting to survive FSB research ‘New Horizons: How small firms are navigating the COVID storm’, found that at the height of lockdown, 41% of small businesses had been forced to close. Of these firms, 35% were concerned they may not reopen. However, faced with a massive challenge, small firms have been resilient, with many successfully adapting, offering new services and developing new products. Others have taken the time to learn new skills, such as digital technologies.

10%

6%

of all small businesses diversified into producing new services during lockdown of all small businesses diversified into producing new products/goods during lockdown

16%

of small businesses developed a new, or increased, their online presence

24%

of small businesses adopted or increased their use of digital technologies (e.g. Zoom, Microsoft Teams) to facilitate working from home

FSB National Chair Mike Cherry said: “These are very uncertain times for all businesses, with futures unknown. Small firms have long been the champions of innovating, adapting and engaging with others, especially during difficult periods, and the current situation is no exception.”

Quirky Quote:

“Hopefully, as companies give more attention to the importance of work-life balance, more and more people will be in a better position to decide and act more holistically on what’s important to them” – Mohamed El-Erian

Quirky Quote:

“Timing, perseverance, and ten years of trying will eventually make you look like an overnight success” – Biz Stone, co-founder of Twitter

Job Support Scheme expansion On 9 October, Rishi Sunak announced that the Job Support Scheme will be expanded to protect jobs and support businesses required to close because of local or national restrictions. On 22 October, he unveiled increased support for jobs and workers impacted by COVID restrictions.

UK businesses affected by restrictions, will be given extra help to keep staff on including a drop in employer contributions to 5% and grants for eligible self-employed people, which have been doubled from 20% to 40% of previous earnings. Business grants up to £2,100 per month will be made available to help those that have been particularly affected sectors in high-alert level areas.

Director General of the CBI, Dame Carolyn Fairbairn, commented on the 22 October announcement: “The Job Support Scheme will be a welcome and much-needed successor to the furlough scheme and will protect many livelihoods when it begins. It’s right that businesses contribute if they wish to access this scheme. But with a tough winter ahead, significantly increased Government contributions to non-worked hours across all regions will do even more to protect people’s livelihoods. The missing middle of pubs, cafes and theatres in tier 2 along with other businesses across the UK who are seeing demand fall away, but with little extra support, will be relieved to see that anomaly come to an end.”

We will provide more detail on this in the November Business Review.

All details are correct at the time of writing (23 October 2020) Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored advice and is for information purposes only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on individual circumstances. No part of this document may be reproduced in any manner without prior permission.

Business Review

October 2020