Labour’s Anneliese Dodds has called on the government to “act now” to help small businesses facing major financial problems due to the economic fallout of the coronavirus pandemic.
Her comments follow the Bank of England’s latest financial stability report, which found that businesses had borrowed £80bn so far this year, compared to £20bn by this time last year, to cope with Covid.
The report published today warned that there were “a number of risks ahead” for businesses, such as further disruption caused by Covid-19 and problems arising from the end of the Brexit transition period on December 31st.
Commenting on the findings, Dodds said: “Small businesses are the backbone of our economy. They have been hit hardest by the pandemic, and now face a huge cash-flow problem. Many have already taken on significant debt just to make it through.
“Today’s report shows they face a worrying future. Labour has repeatedly called on the government to set out a plan for rebuilding business and tackling high levels of corporate debt. Without that, we risk rising insolvencies and yet more job losses.”
Staying with Labour’s messaging on ‘responsible government’, the Shadow Chancellor added: “The government needs to do the responsible thing and act now to help our small businesses.”
Earlier this month, Shadow Business Secretary Ed Miliband warned that small businesses had been “let down by shrinking government grants” after analysis found hundreds of thousands of businesses might not survive the winter.
The Office for National Statistics analysis showed an estimated 390,000 small businesses were worried they would not survive to spring, with more than one million businesses reporting low cash reserves for the next three months.
The new Bank of England report found that net bank lending to UK small and medium-sized businesses in the year to October had been more than 40 times higher than the 2016-19 average.
It noted that smaller businesses tended to be more concentrated in sectors hardest hit by public health measures and could struggle to borrow money in the future as they have already borrowed heavily using government schemes this year.
But the BoE also said UK banks were in a strong position to support households and businesses through the pandemic, adding that it was “in banks’ own interest to continue to lend” to protect the economy.
Dodds called on the government last week to “do the right thing” by using more than £1bn in business rates relief returned by supermarkets to support businesses and individuals facing tough coronavirus restrictions this winter.
Supermarkets, including Sainsbury’s, Tesco and Morrisons, announced they would give back £1.29bn gained after the UK government said all retail, hospitality and leisure businesses would not be required to pay business rates in England for the year 2020-21.
The Shadow Chancellor welcomed the decision by supermarkets to return money gained from the measure but said it “should never have been necessary” as the government could have avoided a “one-size-fits-all” approach to rates relief.
“If the UK government had done as Labour asked, and as we did in Wales, it could have targeted support to those who needed it right from the start and saved many more jobs,” the Labour frontbencher said.
The Welsh Labour government adjusted its relief scheme and did not extend the 100% relief to properties with a rateable value of £500,000 or more – a decision that saved approximately £117m, despite affecting fewer than 200 properties.
Labour has repeatedly called for a more targeted approach to business support during the pandemic, with a focus on protecting small businesses that have been worst affect by Covid rules and continue to face restrictions over the coming months.