The end of the furlough scheme coincides with the withdrawal of the small employer Sick Pay Rebate meaning that small employers could find their operating environment becoming less hospitable as of 1 October.
The Coronavirus Job Retention Scheme provided 60% of the wages of furloughed staff up until the end of September, with around a fifth of employees in businesses with 2 to 4 employees still on full or partial furlough in early September, according to HMRC. Small businesses have been far heavier users of furlough than large firms, reflecting the disproportionate impact of the pandemic and restrictions on smaller firms – and the gap has grown as the scheme has neared its end.
The UK Government has not published statistics yet on the usage of the Coronavirus Statutory Sick Pay Rebate Scheme; however, we believe it is likely to be in the hundreds of thousands. Alongside testing and vaccinations, the SSP rebate gives confidence that employers can afford the bill when staff fall sick or are told to self-isolate.
Meanwhile, the New Enterprise Allowance scheme should be expanded into a Kickstart Start-Up scheme, offering unemployed people mentoring, weekly payments, and other support to help them launch their own businesses. This should be calibrated alongside the Welsh Government’s own Young Person’s Guarantee.
In addition, the VAT rate for hospitality and tourism businesses will rise to 12.5% from 5% as of 1 October.
The restrictions on the issuing of winding-up petitions, a common trigger for corporate insolvencies, also expire today – although the threshold for the debt that a company must owe to its creditors before a WUP can be issued against it has been raised to £10,000, from its pre-pandemic level of £750, until 31 March 2022. Creditors will also be required to give debtor companies 21 days to respond to a WUP with payment proposals during this period.
Mike Cherry, National Chair of the Federation of Small Businesses (FSB), said:
“For many small businesses, the end of September will mark a significant turning point. With challenges on many fronts, from rising energy and input costs to staff shortages and supply issues, the removal of some of the support measures brought in to hold off the worst effects of the pandemic on businesses will be tough for many to navigate.
“It’s potentially a dangerous moment. As the weather turns colder, so too will the operating environment for many firms. With recent economic growth numbers having fallen below expectations, the upcoming festive season may not provide as much of a boost as hoped to many small businesses’ bottom lines.
“We all know that the unprecedented support to businesses and individuals which the UK and Welsh Governments provided to forestall a full-on economic collapse could not last forever, and that some sort of ‘business as usual’ would need to be resumed. But Governments needs to think carefully about the signals it wants to send to the business community. The memory of how National Insurance and dividend tax rises were pushed through Parliament with no time for proper scrutiny is fresh in every business owner’s mind, and has dealt a significant blow to stores of goodwill. The prospect of huge jobs tax increases now hitting in April will lead to an extra 50,000 people joining the unemployment line.
“The skills shortages in many sectors are continuing to bite – not least in tourism and hospitality, which will have to factor in a higher rate of VAT as of tomorrow. Add in the rumoured axing of the New Enterprise Allowance, and the implied message about the value placed on nurturing entrepreneurship is equally bleak. It seems bizarre that at a time when we should be starting the long road to recovery, the UK Government is making it harder to start a new business.
“The easing of restrictions on winding-up petitions is thankfully unlikely to lead to a flood of corporate insolvencies, due to the mitigation policies in place until next March. However, it is still a potential wake-up call to businesses struggling with debts, and we hope that creditors of all kinds will show forbearance wherever possible.
“Firms feel assailed on all sides, from energy prices and fuel shortages to longer-term changes to taxes which will disincentivise growth and investment. Small businesses need to feel the Government is on their side; however, recent decisions made have not had their interests at heart. They will be looking to the Conservative Conference and later to the Budget for signs of positive support, rather than closing schemes and hiking taxes. Increasing the Employment Allowance, and rejuvenating the New Enterprise Allowance, would be good places to start.”
Ben Francis, Policy Chair at FSB Wales added:
“Against this difficult backdrop with businesses facing continued economic uncertainty in the face of reducing support, we need to see unified purpose from both UK and Welsh Governments. Welsh Government must come forward soon with a clear vision for the economy to help map the road ahead to recovery and we were encouraged by comments by the Minister for Economy on Wednesday which hinted at that. Furthermore, we need clarity on things like the Young Person’s Guarantee and how businesses will engage with that and the opportunities it poses for boosting entrepreneurship and well as addressing some of the skills challenges faced by our economy.
We also need to see clarification of the next round of Economic Resilience Funding to help businesses move to the emergency and survival footing of the Pandemic to something more resembling sustainable regrowth to help recover our economy.
Recovery of that economy is by no means a given and businesses find themselves within a precarious landscape with multiple challenges. Those very same businesses will be required for the recovery effort ahead and governments in Westminster and Cardiff Bay should be looking to do all they can to support businesses and ensure they are in the best possible shape for that task”