Lancashire business group calls for aid extension as 'flashpoint' looms for small firms

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A Lancashire-based organisation has called on the Government to extend financial aid until the full unlocking of conronavirus restrictions ends or risk causing a flashpoint which could see businesses collapse.

The Federation of Small Businesses, the UK’s largest business group, is urging the Treasury to update timeframes for business support measures which are due to end this week, 18 days before the potential lifting of trading restrictions in England.

The Government has announced three measures to help firms – extensions to an eviction moratorium and suspension of wrongful trading rules for directors, and renewed efforts to release circa £1bn of restart cash grants held up in local authorities – but not any fresh funding for firms in the extension.

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On Thursday, the five per cent of wage costs that employers contribute for furloughed staff through national insurance and pension contributions will rise to 14 per cent as the Job Retention Scheme winds down.

Mike Cherry from the Federation of Small BusinessesMike Cherry from the Federation of Small Businesses
Mike Cherry from the Federation of Small Businesses

Firms will have to start paying VAT deferred from last year, and retail, leisure and hospitality firms will lose business rates exemptions.

July 1 will also see a new VAT One Stop Shop for small UK exporters to the EU launched and the full wind down of import easements installed for six months after the EU-UK transition period ended.

And the FSB’s recommendations come as repayments on more than £45bn of emergency bounce back loans start to fall due. Last week , at least one non-bank provider is refusing to offer Pay As You Grow, introduced by the Treasury to allow struggling firms to extend grace periods or repayment timetables for emergency debt.

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FSB national chairman Mike Cherry said: “Last year the Government told us that it would do ‘whatever it takes’ to help the 5.9 million sole traders and small businesses on which our recovery will depend. But now, after a crushing delay to the reopening road map, the new support measures are limited to those which do not cost the Treasury a penny.

“Unless the Government acts now, it risks a serious economic flashpoint this Thursday. At the very least, HMRC should take a safe harbour approach when they are faced with a small business that has made a mistake or has no cash left – Time To Pay should be promoted and encouraged.

“As well as revising support measure deadlines and extending access to, and awareness of, the SME Brexit Support fund, we’re recommending the Government look again at our proposal to give those struggling with emergency loans the option to swap that debt for employee equity.

“Doing so would protect the futures of viable firms, and the staff they employ, whilst helping to close our persistent productivity gap.”