Coronavirus is dominating the headlines and without wanting to join the scaremongering, it seems it’s officially time to start panicking – if you’re a small business owner that is.
Yes, we can reassure ourselves that the coronavirus in itself is not a life-threatening illness – “but it’s basically just a cold” has been bandied about as an almost tagline to downplay hysteria.
And yes, the virus is still fairly contained here in the UK (the number of confirmed cases has now reached just over 200 – as of 7 March 2020 – and we’ve seen two fatalities).
But, although hopefully the health implications for most people in the UK won’t be long-lasting, the economic ones almost certainly will be.
And while there’s been a lot of focus on big businesses, the public sector and even freelancers and the gig economy – no one really seems to be talking about the potentially devastating effects on the lifeblood of the UK economy – small businesses.
Which is madness.
The impact on the bottom line for small businesses
In 2019, there were 5.9 million small and medium sized enterprises in the UK, making up 99% of all businesses.
For a huge number of those companies, they’ll be operating on incredibly thin margins – roughly about a 10% profit margin or the equivalent of one month’s trading. And what that means in practice is, you only need to lose a month’s revenue, and you face going bust.
Clearly supply chains are being severely disrupted, which in turn creates a whole range of cashflow headaches.
And if increasingly people are to stay at home or work remotely, and big events continue to be cancelled, what does that mean for the trade of cafes, shops, pubs and other service businesses?
Additionally, with warnings that more than six million people could end up off work sick in the peak of the virus, small businesses could find themselves with both no customers – and no staff.
With turnover dramatically impacted, for a lot of these businesses there will only be two choices: make redundancies or make payroll.
What are the government going to do?
Deferred taxation, rent reduction, waiving administrative fees, subsidising R&D costs, and increasing financial support – among others – all came into force immediately and will be available for the entirety of 2020.
In the UK, the government has discussed emergency legislation for schools and just yesterday Boris Johnson announced a change in statutory sick pay to protect individuals who are having to self-isolate. But as of yet, there’s been no clarity on the employment law position for small companies.
And that’s just not good enough.
There’s a number of very serious questions and issues the government should address on the behalf of our small firms. As panic only seems to be escalating, we need some clear guidance.
- Are they going to give a VAT break or NI break? And what will it look like?
- Will there be flexibility for employers around unpaid or half paid leave? (At the moment, unless it’s specified in your employment contracts, businesses are unable to utilise reduced hours or lay offs. This is clearly to protect individuals, but in a time of crisis like this there could be a real long-term gain in allowing businesses a bit of breathing space to get through a difficult few months if it means ultimately they can continue trading).
- What other additional financial support will be available?
Hopefully it’s a question of ‘when’ and not ‘if’ that we’ll have some answers on this.
What should businesses do right now?
And while we wait, there is, at least, some good news.
Check out your finance options. Banks have committed to offering emergency loans to businesses that are showing severe financial strain – and Andrew Bailey, the incoming Bank of England governor suggested the government do expect more loans may need to be provided in the form of supply-chain finance.
If your trade is already being dramatically affected, look into your finance options now – don’t leave it till it’s too late. (you can actually see if your business is eligible for funding just by entering your company details on our site here).
Check your insurance policy. Another positive is that Covid-19 has been declared a “notifiable disease”, a formal classification required by many insurance policies. This doesn’t guarantee you’ll be covered, but check the small print of your business insurance policy so you know where you stand.
Be as prepared as you can be. Don’t make drastic decisions based on the media hype and what big businesses may be doing. Think about what is actually feasible for you to do in your small business that will help prevent the virus spreading (better sanitation for instance, remote working where applicable) and what your contingency plan is if your revenue does take a hit.
Keep up to date with the latest announcements. This piece was certainly not designed to scare business owners further, more to help call for action for support. Listen out for potential measures that could alleviate some strain – so you’re ready to make the most of them.
And finally, keep calm and carry on.
Business owners are notoriously resilient, and running a business is a rollercoaster at the best of times. Potentially there are some pretty tough times ahead, but if your business’ cashflow can survive the next few months, we’re sure you’ll come out the other side fighting fit.