Call for gaps in coronavirus support for businesses to be addressed

The Institute of Directors (IOD) has called for help for companies and entrepreneurs currently ‘falling through the cracks’ of government support, as new figures underline the impact of the coronavirus outbreak on firms.

In a survey of over 700 business leaders conducted following the Government’s announcement of a job retention scheme, seven out of ten directors said the outbreak posed a high or severe threat to their organisation, up from two in ten in a similar poll a month ago.

Forty per cent of respondents had already contacted their bank about an emergency loan, while slightly more had contacted HMRC to defer tax payments. Over 70% of directors have already seen demand for their products or services decrease, including 42% who had seen a significant decrease.

Based on the extreme disruption expected over coming months, with two-thirds of business leaders describing the outbreak as a severe threat to the economy, the IoD called for support in three areas:

• Extending support to company owner directors: Directors of the smallest companies, including consultants and freelancers, ​often take their income as dividends. Those that provide a clear paper trail should be able to make a furlough claim of 80% of their monthly income subject to tax, up to a £2,500 per month cap, ​to put them on par with support available for employees and the self-employed. Meanwhile, the duties directors can carry out while furloughed should be clarified.
• Encouraging co-operation from lenders: Banks must be flexible and accommodating to get cash to companies as quickly as possible through the Coronavirus Business Interruption Loan Scheme. All lenders should follow the example of the banks who have dropped requirements for personal guarantees. Financial institutions should also avoid share buybacks and large executive incentive awards to make sure the money is going where it is most needed.
• Support for firms without premises: Grants available through local authorities for firms that already pay little or no business rates on their premises should be extended to some of the smallest companies and start-ups that do not have premises (including those in co-working spaces).

Edwin Morgan, Director of Policy at the IoD, said “The Government deserves credit for acting quickly and producing a substantial package of measures to support the economy, and in particular the breathing room they have provided for directors on insolvency. In a situation as frantic and fast-moving as this, inevitably some gaps have opened up, but these need to be acted upon to prevent people and businesses falling through the cracks.”

“The Chancellor has said that tax treatment of different forms of payment will need to be looked at when the dust has settled after this crisis, and there is certainly a case for reform. This is a discussion for the future, however, and company owner-directors need support now.”

“It is a risky proposition setting up any business venture, and the Government has rightly celebrated entrepreneurial people. Directors are nothing if not resourceful, but in a situation where demand vanishes apart from in a few sectors, extraordinary temporary measure​s are required.”

National Chairman of the Federation of Small Businesses (FSB) Mike Cherry said “While the Government’s Self-Employed Income Support Scheme will help 3.8 million people, and is therefore welcome, there remain groups who are completely out of scope and feel left behind.”

“These include directors of smaller limited companies who pay themselves through dividends or dividends and salary, many of whom have worked extremely hard to build up their businesses and now find themselves in financial peril. It also includes those who have more recently become self-employed, and those whose profits are above the cap of £50,000 a year.

“While some of those left out of the income support initiative might at least be able to benefit from other schemes, such as job retention, grants, emergency loans or universal credit, it is increasingly clear that there are some for whom those measures won’t be enough.”

“We are urgently feeding into the government as many examples of this as we can, to highlight the plight of those who are falling between the cracks and are facing bleak financial situations. It’s important that we represent the full picture of our whole community with those in power.”

“FSB had pushed the government hard for its self-employed scheme to be as generous as possible, to help as many as possible, and to start as soon as possible. We hope that ministers understand the many real-life examples of those left behind that we’re highlighting. It is also vital that the many other schemes already announced are rolled out as quickly and effectively as possible, and we are very willing to help the government in any way we can with that at this time of national emergency.”

IOD survey results:

What level of threat do you think coronavirus (COVID-19) poses to:

	No threat	Low threat	Moderate threat	High threat	Severe threat	Don’t know/NA
Your organisation	1%	5%	23%	32%	39%	0%
The UK economy	0%	0%	5%	28%	66%	0%

Have you pursued any of the support mechanism that have been announced so far?

Contacted HMRC about deferring tax payments	42%
Been contacted by local authority about grants	9%
Contacted your local bank about an emergency loan	40%
Other	48%

What impact so far, if any, has the Coronavirus outbreak had on demand for your products/services?

Significantly decreased	Decreased	No/little change	Increased	Significantly increased	Don’t know/NA
42%	30%	17%	5%	4%	3%

*710 respondents, conducted between 20^th-26^th March 2020