Support for SMEs: Covid-19

Kevin Hollinrake Excerpts

Tuesday 10th November 2020 Westminster Hall

[Kevin Hollinrake (Thirsk and Malton) (Con)]

And proudly so, Sir Edward.

I am delighted to follow the hon. Member for Vauxhall (Florence Eshalomi). My hon. Friend the Member for Carshalton and Wallington (Elliot Colburn) made a great speech and set the scene well for subsequent speeches.

I draw the attention of Members to my entry in the Register of Members’ Financial Interests. This is my third recession as a businessman—once under a Conservative Government in 1992 and once under a Labour Government in 2008—but I have never seen the amount of support that we have received through this recession. That support has been on a different scale altogether. Having said that, the recession has been on a different scale altogether too. Previously, there was no job retention scheme, no business rate grant and no VAT discount. There were no free school meals in 2008, when millions of people lost their jobs. My business alone had to make two thirds of our workforce redundant. It is among the hardest moments of your life when you have to do that to 130 people you worked with for a long time. I had very little support during that time, but the Government are now doing a tremendous job in providing support for many SMEs.

The No.1 support that can be given to any business is to allow it to trade. The Government have tried to do that throughout, despite the calls—on many occasions from the Opposition—to close the economy, which would have meant more businesses destroyed or a greater burden on the taxpayer. I think the Government have done all they can to spread the benefits they have provided evenly, but that is almost impossible—in fact, it is impossible. If the economy is closed down, whatever the Government throw at it, some businesses will lose out, and some will be hit harder than others. The hon. Member for Kingston upon Hull West and Hessle (Emma Hardy) was absolutely right in her plea for the coach sector, but it is so difficult for the Government to design a scheme that will suit all people equally. That is why we must try to keep the economy open at all costs; that is what we should be doing.

As my hon. Friend the Member for Bexhill and Battle (Huw Merriman) said, when large swathes of the economy are shut down but some parts are left open, existing trends are accelerated. Amazon, of course, is doing very well through this recession and has eaten further into the market share of SMEs. The fact that supermarkets are allowed to open again chips away at the market share of SMEs and accelerates long-term trends. As a result, some businesses that might have got through this had it been done in a more progressive and gradual way will be destroyed forever.

Although we have done a lot already, the Minister will be familiar with the kind of asks I will make for the future. There has been a fair bit of support—a lot, in fact—in the form of business rates grants, the job retention scheme and the VAT discount. The hon. Member for Vauxhall said that her businesses have seen no support, but it is very rare that hospitality sector businesses have got no support.

There has been a lot of grant support, but inevitably the Government have also had to say to businesses that they have to take some of it as a loan. Bounce back loans have been a huge success, and what the Minister has done now in terms of top-ups to those loans is absolutely right, but he knows one of the problems we have is with non-bank lenders and their customers. We have persuaded businesses to try new competition, new fintechs, for their bank accounts, but, having done that, those businesses are now locked out of the Bank of England’s term funding scheme, which provides the funding for bounce back loans. Customers of non-bank lenders such as Tide are locked out of the bounce back loan scheme.

There is a number of ways to solve this: give non-bank lenders access to the term funding scheme—I know the Minister cannot do that himself—ask banks to lend to non-bank lenders, or ask banks to lend to the customers of non-bank lenders. The difficulty with the latter is that customers then migrate back to the big banks; also, they have a finite amount of money to lend, so it is flawed. We need a solution to this problem. What the Treasury could do is provide funding directly to non-bank lenders through the ENABLE guarantee scheme. That would solve the problem pretty much overnight, if the Government were willing to do that.

I have used up the time allocated to me, so although I have a few more things to say I will leave it there. I hope the Minister will respond to some of these points in his reply to the debate.

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[Owen Thompson (Midlothian) (SNP)]

Sir Edward, it is a pleasure to serve under your chairmanship. I echo the congratulations to the hon. Member for Carshalton and Wallington (Elliot Colburn) for securing this debate, and also pay tribute to those petitioners who have contributed towards the petitions included in this.

After enduring so many months of hardship, it is good to be able to rise having heard some positive news yesterday about the possibility of a breakthrough in finding a vaccine. It is very early days, of course. If it meets its promises, it will still be a long time before the impact gives a much-needed shot in the arm to the beleaguered high streets around the country; to the shops, hotels, pubs, restaurants, warehouses, theatres, stadiums, offices and businesses of all shapes and sizes across the UK. The crisis drags on,and battle-weary SMEs that would normally be driving our economy have been almost driven into the ground, but at least we have this glimmer of light in the winter gloom; that there may be a solution on the horizon that will keep many of them from giving up the ghost altogether.

There are plenty of reasons for the Government not to give up on those businesses: the skilled and dedicated SMEs will turbocharge the UK’s recovery if we can get them through to the other side of the crisis. The first, crucial step was in extending the furlough scheme and the self-employment income support scheme for five months—albeit belatedly. That was certainly welcome. It would have been helpful if that announcement had not been made so late in the day, as it might have prevented some of the job losses that we have seen but, as with the Brexit negotiations, we have seen that the Government has a habit of sometimes leaving these things to last-minute chaos.

Prior to the announcement, the devolved Governments, and the local administrations in the north of England, had been crying out for the expansion of the levels of support that were so desperately needed to protect jobs. I still cannot understand why those calls fell on deaf ears, yet, when a lockdown was announced for the south of England, a far more generous 80% furlough package was suddenly made available again. I am sure that that was just a coincidence—I am absolutely sure of that—but while it is definitely better late than never, the Scottish Government’s public health policies should not have to be hindered in this way. While furlough extension is essential, the second wave will hit far harder than the first, and it is only a part of the solution. Many SMEs are so heavily reliant on this golden quarter to balance the books that lockdown is crippling cash flow, and that will be felt well into next year.

The need for tough pandemic restrictions is particularly devastating to the hospitality sector and its employers, as was so well outlined by the hon. Member for Strangford (Jim Shannon). It is necessary, but that does not make it any easier for those businesses. Prior to the second lockdown, Q2 GDP data showed a 20% decline in the UK economy; for the hospitality sector, this was around 85%. In September, only 7% of businesses surveyed by UKHospitality were feeling in any way confident about the next 12 months.

Many SMEs have had very few good trading days over the last eight months. In events, some businesses are operating at only 5% of turnover or less. SMEs have already used up their rainy-day resources and have built up debt from the Government-backed loans, where they could get one—and we have already heard some of the issues around that this afternoon. They are now worried about how to pay non-staff costs, and how much of the big-ticket grants announcements will actually reach them once they are spread out across all other businesses.

It was good to see the live events sector get a specific mention in the £1.1 billion additional support package allocated to councils in England to support businesses, and the Barnett consequentials associated with that for devolved Governments. However, it is a widely-shared pot, allocated at £20 per head, and the devil will be in the detail of its distribution.

I also welcome the £2.38 billion provided by the Scottish Government to support businesses, including the £48 million fund for employers and businesses impacted by recent restrictions; a monthly grant support coming back, with the ongoing five-level tier framework; and the £11 million contingency fund recently announced for businesses, including nightclubs and soft play areas, which had missed out on other supports. I realise that this will not make up for lost revenue at this time, but the Scottish Government lack the big economic levers and borrowing powers that they need, and are making the best of the resources at their disposal.

I look forward to the day when we do not need to have this debate any more—when bad karaoke is back in the pubs and live gatherings can get going again with all the disparate jobs that they support, from lighting technicians, musicians and planners to caterers and technology manufacturers. Events support about 1 million jobs. When able to run, they contribute billions of pounds to the economy every year. Perhaps because those jobs do not fit neatly into the existing characterisations, the sector has missed out on so much targeted support so far.

The #WeMakeEvents campaign has very helpfully suggested sector-specific measures to help the industry survive, such as a government-backed insurance scheme to ensure organisers can recover costs if lockdowns happen. During a previous debate I led on this topic, the Minister agreed that the UK Government were willing to engage with the campaign, although no meeting has yet been arranged. I invite the Minister again today to see what can be done to move that forward.

We also need to look at the replacements for the coronavirus business interruption loan scheme. We had a lengthy debate on that in the main Chamber last week. To avoid going over old ground again, I will not repeat too many of those points, but I think it is very clear that Members from all sides of the Chamber recognise the need to look in a level of detail at a number of issues associated with those loans. From my point of view, we would far rather see these as grants. Again, I suggest it would be far more sensible to write off these debts for struggling SMEs and look at more innovative grant and equity-based solutions to stimulate the economy as we go forward.

[Kevin Hollinrake]

We agree on a lot, but we differ on this point. How would it be fair to write off that kind of debt and make grants when some businesses have not taken a loan and other businesses will pay back those loans? How fair would it be to those businesses and to the taxpayers who have funded those loans?

[Owen Thompson]

I hear the point that the hon. Gentleman makes. We had an exchange on this on Thursday. We are in a situation where the current system is not fair for millions of people who get no support whatever. We need to do whatever we can to make sure that our high streets are not utterly decimated when we get to the end of this pandemic. I suggest that is one measure that could be taken that would absolutely guarantee the future of those businesses.

I turn to consider those running small businesses from their homes—swimming instructors or travel agents whose activities are not currently available to the extent that they were before, or those who rely on large gatherings. Here, I draw attention to the Showmen’s Guild, which has effectively been closed down for a year, but because their members operate from home, they have not qualified for any support so far. Vast numbers of individuals in households and businesses have seen their income falling perhaps by 100% in some situations. They are at risk of losing their homes and cannot get the support they need. Why are the Government not wrapping their arms around them? Why is their plight still ignored? It is an unedifying consequence of this virus that the privileged members of our Government can determine which businesses are viable, what cultural events are important to save, and who gets support through a crisis or who should simply retrain in cyber.

This is an emergency, and we need to make sure that a lifeline is available to all those who need it, not just those who fit the mould of support schemes that were created hastily. I look forward to the day when SMEs can just get on with it again and think of their business, rather than what support is available, but that is a long way off. As we focus our collective efforts on following guidance to drive down the virus, the Government must make sure the measures are in place to protect jobs and businesses while we all seek to save lives.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

Thank you for your chairmanship this afternoon, Sir Edward. I congratulate the hon. Member for Carshalton and Wallington (Elliot Colburn) on tabling this debate and thank all Members who have contributed to a thoughtful and varied debate. I will not mention everyone, but I was particularly struck by some of the points made, for example, by my hon. Friend the Member for Halifax (Holly Lynch) who raised the difficult issue of local markets; my hon. Friend the Member for Kingston upon Hull West and Hessle (Emma Hardy) who talked about family owned coach companies; the hon. Member for Bexhill and Battle (Huw Merriman) who talked about local shops; and my hon. Friend the Member for Vauxhall (Florence Eshalomi) on the issue of high rateable value properties in central London. The indefatigable hon. Member for Thirsk and Malton (Kevin Hollinrake) quite rightly described this period as a great acceleration; we do not have time today to explore that idea fully, but it is a crucial feature of the experience that we are going through. My hon. Friend the Member for York Central (Rachael Maskell) talked about leaseholders and self-employed people. And of course our great friend the hon. Member for Strangford (Jim Shannon) talked about the crucial wedding industry. I can tell him that in my part of the country—the Black Country—we have an enormous wedding industry, including an Asian wedding industry that is a huge business, and it has suffered all the knock-on effects that he talked about.

The covid pandemic has forced Governments around the world to make major and unprecedented interventions in the economy. In this country, those interventions have included some of the measures that we have heard about this afternoon: the furlough scheme; the grants to small businesses; state-guaranteed lending schemes; tax deferrals; and a lot more. These interventions have been large-scale; indeed, they have been on a larger scale than in previous recessions, because the experience is different to that of a normal recession. They have been necessary, although some people have been missed out by them, as we have heard.

To have stood back and simply let business and workers take the full hit from this pandemic would have caused economic carnage and long-term damage on a scale unseen in living memory: it simply would not have been a feasible option for the Government to choose. In many cases, the grants and other support for small businesses that have been provided have been the difference between survival and going under—there is no doubt about that. They have provided vital revenue to businesses when there has been none from normal trading, because there has simply been no possibility of conducting business.

Of course the interventions are costly, but stepping up in a once-in-a-century situation such as this is what government is for. I am old enough to remember the last time that we had real mass unemployment in this country, when I was growing up in the 1980s, and the social and economic consequences of that were felt for many years afterwards, in terms of the impact both on individual families and on areas such as the Black Country, part of which I represent, and many other parts of the country, too.

A lot of the interventions this time have enjoyed cross-party support. We called for the furlough scheme and we supported it. That was particularly true in the early days of the pandemic. But after that period, things have become both more disjointed and more contested, and there is a reason for that.

I think that we have had four different versions of an economic plan in the last six weeks, with different levels of business support, various percentages of support for self-employed people, and at one point the withdrawal and then the reinstatement of furlough over one weekend. Trying to keep track of all those changes reminded me of what was said about the legendary Celtic winger, Jimmy Johnstone, and his effect on defenders; it was said that he gave them “twisted blood”. It would give any small business person twisted blood trying to follow all the twists and turns of what has been announced in recent weeks, only for us to end up pretty much back where we started in March.

I make that point not to engage in a bit of political knockabout or to take a partisan swing; it is to make a more serious and deeper point, because I think the story of recent weeks betrays a deeper problem within the Government. We are led to believe that there has been a debate or a disagreement in Government between those who have championed public health on the one hand and those who have championed the opening up of the economy on the other. We might say it is a debate between hawks and doves, with the Chancellor portrayed in this debate as a hawk.

Any Chancellor will rightly be concerned with the state of the economy—that is their job—but the mistake in this situation, and the real point that I want to make today, is to regard it as a choice between getting the virus under control and getting the economy moving again. We should have learned by now that any economic plan that does not have at its forefront getting the virus under control will not work, because when infections, hospitalisations and death rates are increasing, by definition the economy cannot be opened up and cannot operate properly. It cannot simply be decided that we open up the economy, because it would by definition mean—when people cannot see their relatives and weddings and all sorts of gatherings cannot take place without resulting in a new outbreak of the virus after a few weeks—going into a period of opening up and lockdown, and opening up and lockdown, particularly when the testing and tracking system is not working properly.

[Kevin Hollinrake]

Will the hon. Gentleman give way?