Ahead of the October budget, we suggest 5 key measures to support the engine room of the economy
October 2021: This week, we've had our thinking caps on and have set out our Autumn 2021 Budget wish-list to build SME resilience. This follows news of a 56% rise in company insolvencies[i] in September 2021 and as many businesses that used the Coronavirus Business Interruption Loan Scheme (CBILS) face the prospect of an increase in loan repayments once the Bank of England raises interest rates.
The Purbeck Insurance Budget Wishlist:
- Offer loan support to more start-ups– expand the existing start-up loans programme to start-ups that have been trading for a maximum of 36 months rather than the existing 24 months[ii] to allow for the fact that some new businesses would have put their plans on hold during the pandemic. Access to mentorship programmes and affordable finance can support these businesses in their growth which will help the overall recovery.
- A ‘Pay as you grow’ initiative to support businesses with CBILS/RLS loans– offering a ‘pay as your grow’ scheme would provide breathing space to CBILS borrowers given the threat of interest rate rises. Businesses would need to meet certain threshold criteria to demonstrate genuine repayment difficulties with solid repayment plans in order to be eligible for term extension or payment holidays. Many businesses have leveraged depleting balance sheets with trading revenues only just returning to pre-pandemic levels.
- Increased access to grant funding– introduce additional grant funding schemes to support compelling businesses and promote competition. This could be across regions, sectors and lifecycle stage.
- Enhanced tax allowances for investment in the workforce- provide subsidies and/or tax allowances to SMEs who invest in and upskill their people by way of training courses and qualifications. This would support the highly skilled, high wages, high productivity workplaces envisaged by the UK Government.
Increase small business rates relief threshold– as proposed by the Federation of Small Businesses ahead of the Autumn 2021 budget, an increase in the threshold would help small businesses finance investment in their workforces, plant and machinery or growth initiatives.
Todd Davison, our MD said: “Small businesses are the engine room of the UK economy yet many are facing a perfect storm of energy cost rises, supply chain issues, a rise in loan repayments, cessation of the furlough scheme and the knock-on effect of all of the above in late payment by customers. They need more forms of financial support to build their resilience, to get them through the year ahead.
“Focusing measures on those businesses at the start-up and scale up phase will help to lead the private sector recovery. However, there must be caution on increasing government borrowing, so a tricky balance needs to be achieved in raising money from taxation without stifling recovery of the public sector as a whole.”
We have been supporting SMEs throughout the pandemic, offering insurance cover that provides protection against the risk of a Personal Guarantee for a business loan being called by a lender following business failure. As part and parcel of cover, we offer advice, mentoring and help at the point a debt needs to be settled, by acting as a point of liaison with a lender. The level of cover is based on a fixed percentage of the Personal Guarantee the company director wishes to insure and this is dependent on whether the corresponding finance facility is secured or unsecured. In essence, if the business does fail, up to 80% of the loan will be settled by the insurance rather than the business owner’s home, savings and other personal assets being called on to settle the debt.
[i] https://www.gov.uk/government/statistics/monthly-insolvency-statistics-september-2021/commentary-monthly-insolvency-statistics-september-2021
