Support for SMEs: Covid-19

Debate between Owen Thompson and Kevin Hollinrake

Tuesday 10th November 2020 Westminster Hall

[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.

Coronavirus Business Interruption Loan Scheme

Debate between Owen Thompson and Kevin Hollinrake

Thursday 5th November 2020 Commons Chamber

[Owen Thompson (Midlothian) (SNP)]

I beg to move,

That this House believes the Coronavirus Business Interruption Loan Scheme is not adequately fulfilling its role for SMEs across the UK; and urges Government intervention to ensure that all businesses are provided with the financial support they need.

I thank the Backbench Business Committee for allocating time for this important debate. My co-sponsor, the right hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts) and I applied for this debate some months ago after hearing the anguish felt by business owners in our constituencies who could not access emergency support and were left struggling to find critical funds to see them through the crisis. I know that colleagues from across all parties in this House from all parts of the UK will have heard similar tales: people who did not know where to turn when the billions of pounds they heard being brandished about were no more than fantasy figures doing nothing to help the reality faced by the businesses they had to work so hard to build. The situation has been in constant flux and the support schemes have been a movable feast—or a never-ending famine, certainly for those who have been excluded so far—so I want to reflect on the current situation and dangers going forward, rather than dwell too long on some of the errors of the past.

A rising tide of debt is making the coronavirus business interruption loan scheme an issue again. Changes to the scheme announced by the Treasury so far do not go far enough to see businesses through to the end of this crisis. The pandemic has gone far beyond anything imagined when CBILS was first announced. England begins lockdown again today and most of Scotland remains severely restricted. The feared second wave is upon us and will possibly be worse than the first. Debt and desperation are rising, yet at the same time support is being cut, withdrawn or very reluctantly extended, without due time to plan or prepare. Those excluded remain so again, and banks are getting more tetchy about lending. There has never been a more crucial time to review the effectiveness of Government-backed loans and support, and to make sure we better meet the needs of everyone across the UK.

When lockdown began, CBILS was one of the first schemes out of the blocks, with a promise of £350 billion being made available in this and other Government-backed loans. Although grants would certainly have been better than loans, I commend the Chancellor for that swift action. It is a pity that after seven months, £62 billion—less than one fifth of that figure—has actually been approved via the various loan schemes. We need to find better ways to make funds accessible to those who need them and to hope that bold replacement mechanisms for CBILS and the bounce back loan scheme, with an emphasis on grants, can be found. Those would plug the gaps in the support already in place and would help to stimulate recovery.

Flaws in CBILS quickly became apparent. It was reported on 12 April, only three weeks after the scheme was launched, that 300,000 inquiries had been made yet only 1.4% of those went on to be successfully approved for loans. Some people did not pursue loans beyond the call to the bank, whereas others gave up before completion of the heavily bureaucratic process. Some seven months later, on 18 October, 73,094 companies had been approved for CBILS out of 159,277 completed applications—that is still an approval rating of less than half of those who completed the process, never mind those who were too worried about the debt to take it on in the first place.

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

I thank the hon. Gentleman for bringing forward this important debate, because although there have been successes with CBILS, there are some shortcomings too and it is right that we discuss them. I accept, to a great extent, the point he makes about grants rather than loans. However, he would probably accept that grants have been made as well as supporting loans, in the form of the job retention scheme and the business rate grants.

[Owen Thompson]

I do accept that point, and it is important that some of those grants have been in place. I would far rather have seen some of the large sums available through CBILS and the bounce back loan scheme made available as grants, as opposed to loans, which add to the debt burden on business.

--- Later in debate ---

[Owen Thompson]

Yes. Charities, who spend so much of their time having to collect from the public and are now having to adapt to new ways of doing that, are among those many who have been pushed into an impossible situation, where the only game in town is what they had to take. We absolutely need to look to see what we can do to support them, to help them out of this situation.

[Kevin Hollinrake]

It is an interesting point, but how would it be fair to people who did not take a loan, or to businesses that paid back their loan, if you wrote off the debt of businesses that did not pay back their loan? How could that possibly be fair?

[Owen Thompson]

Each business took its decision about what position it was in at the time. Many would face the prospect of going out of business; the heart of our communities would vanish overnight. One swift step by the Treasury could solve that, to support and maintain our communities.

--- Later in debate ---

[Kevin Hollinrake]

It is an interesting point, and it is worth having a debate about it, but lots of businesses, including mine—I draw the House’s attention to my entry in the Register of Members’ Financial Interests—took loans on the basis of a safety net. Not only did they not need it, but they were unsure about their commercial circumstances and they will be able to pay that debt off without going bust, and intend to. Are you intending to write off the debt to my business, which I did not need, which the taxpayer has funded, even though I do not need that money, on the basis that everybody should just get free money?

[Owen Thompson]

As I say, every business took the decision about why they needed to take a covid loan or a bounce back loan. This is about ensuring that we protect the jobs and security for those businesses going forward, and making sure that our communities are protected.