Member Article

Struggling businesses counting the cost of government support

THE cost of keeping the economy afloat during the COVID-19 pandemic might actually be leading some businesses towards failure, a leading Sheffield financial expert has warned.

Latest statistics suggest that as many as 250,000 UK small businesses will face insolvency in the coming year.

In a survey conducted by the Federation of Small Businesses, 58 per cent of the companies questioned predicted a reduction in profitablity, with fears of ongoing job losses in the months ahead and the possibility of collapse.

Adrian Graham, of Sheffield insolvency and business turnaround company Graywoods, says that the past year’s raft of support packages, created specifically to help businesses weather the Coronavirus storm, might be actually now be helping to mask major problems facing the business community.

“We really do have to ask if the government’s assistance measures have helped or have they just delayed the inevitable for businesses that were already struggling?” he said.

“Many businesses have actually taken on extra debt, whether that be through bounce back loans or deferment of their HMRC payments.

“But as the country is now in lockdown again and the possibility of further restrictions remains high, these delaying tactics might simply be putting off the inevitable.

The Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loans were created to provide financial support to smaller businesses affected by coronavirus but the key word there is loan - it’s not a gift, it is something that will ultimately have to be repaid.

“Like other schemes, it is a liability that now sits on the balance sheet of businesses, where the level of liability is now far greater than they can afford.”

At the same time, Adrian added, many small businesses were also now struggling with the adjustments necessary for a post-Brexit Britain.

“Nobody could have predicted the impact that COVID-19 was going to have on economies around the world but to add that to the complexities of Brexit is just one more crisis for small businesses already facing uncertain times,” he said.

“Many businesses, of course, are hoping that the vaccination programme will help kick start the economy but even if does, there are many companies still facing months of economic unpredictability and worse.

“Simply doing nothing, though, is not going to improve a situation where loans are being called in and HMRC are again expecting payment.

“The only thing to do is to address the crisis and seek professional advice on how to contain a bad situation.”

This was posted in Bdaily's Members' News section by John Highfield .