The Institute of Directors 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 measures are required.”