HUNDREDS of businessmen have written to the Chancellor, urging him to scrap repayments on Government-backed loans ahead of next month’s Budget or risk a tidal wave of insolvencies.
The 388 signatories want ‘swift and decisive action’ that would see debt accrued through Government-backed loans written off for small and medium-sized enterprises (SMEs) to give the best chance of survival for the 2million-plus businesses which have taken out loans since the beginning of the pandemic.
Earlier this month, Rishi Sunak unveiled the Government’s Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS). This offers businesses the option to extend repayment terms from six years to ten, as well as make interest-only payments or pause them entirely for six months.
However, the ‘Fighting Back for Business’ campaign, founded by entrepreneur Simon Dolan, argues that these measures do nothing more than ‘delay the inevitable’ with millions of SMEs teetering on the brink of insolvency. This is reinforced by recent warnings from the Federation of Small Businesses (FSB) that 250,000 could be lost within the next 12 months.
SMEs have long been described as the engine room of the UK economy, with most recent statistics suggesting that they account for 52 per cent of private sector turnover. The hundreds of businesses which put their name to the letter include corner shops, launderettes, hairdressers, theatre and dance companies, travel agents, yoga studios and others.
Many have experienced considerable losses throughout the pandemic, with some unable to trade since March 2020. Some have been forced to sell critical equipment and others to take out personal loans to pay workers who had fallen through the cracks in Government support. James Thompson, founder and director of the company Marmot Tours, explained: ‘We have been unable to run any holidays for 18 months, so have not had any income during this period. We are surviving on a loan, which is going to take years to repay. There has been no tailored support from the UK government for the travel industry. We are currently uncertain when travel will resume and in desperate need of a grant so that we can recover.’
It is estimated that writing off loan repayments would cost the Treasury approximately £68billion. The businesses argue that compared with the costs of bailing out the banks after the financial crisis, which amounted to around £137billion, writing off repayments on Government-backed loans would be not just realistic but crucial to the recovery of the UK economy.
Simon Dolan said: ‘SMEs are the lifeblood of the UK economy and have been consistently overlooked during the Covid-19 pandemic. Millions of businesses have admirably navigated the turbulent waters they have found themselves in during the last 12 months and deserve to be supported in their road to recovery.
‘Not a single business would have wanted to take out these loans, and many did so under the assumption that they would be trading once again within a couple of months, not still waiting for clarity and certainty a year later.
‘It is time that the Chancellor listens to the voices of actual businesses across the UK. The first step towards a thriving economy post-coronavirus hinges on businesses still being open, and ensuring they are not weighed down by looming loan repayments will be vital in countering the possibility of unparalleled insolvency figures.’