Chancellor Rishi Sunak (pictured) has been urged to offer more support to small- and medium-sized enterprises (SMEs) amid a perfect storm of rising inflation, labour shortages, rising interest rates, supply chain disruption, and the rapid spread of the Omicron variant.
The Federation of Small Businesses (FSB) has warned that more targeted support is required from the government to help small businesses weather the economic challenges of the coming weeks and months.
The rapid progression of the Omicron variant has seen the government issue a new work from home order, while chief medical officer Chris Whitty has advised festive revellers to limit their Christmas socialising, in a new blow to the beleaguered hospitality sector.
Earlier this week, it was announced that inflation had reached a ten-year high of 5.1 per cent. Meanwhile, new Office for National Statistics figures showed that SMEs faced a 14.3 per cent growth in the headline rate of input prices in the year to November.
And today, the Bank of England’s Monetary Policy Committee voted to raise the base rate from 0.1 per cent to 0.25 per cent in an effort to combat inflation.
FSB national chair Mike Cherry warned that the latest rate rise will heap even more pressure on small firms with debt – 40 per cent of which describe their level of borrowing as “unmanageable”.
“More than a million small businesses took out loans during the pandemic, with a significant proportion of them first-time borrowers,” said Cherry.
“Many took on debt more than a year ago, on the basis that Covid would be under control by now.
“While bounce back loans thankfully have a fixed interest rate, a lot of facilities held by firms…will be affected by the uplift, alongside personal borrowing. Any increase could push those just managing to make ends meet to the brink.
“The situation is critical. And yet, where is the support that small businesses need? We’ve put recommendations to policymakers and – in these final crucial days before Christmas – it’s more than time for the government to step in. If it doesn’t, many smaller firms may not make it to the end of this year.”
These recommendations include reinstating the Covid sick pay rebate, and enabling test and release in scenarios where staff are pinged at work.
Cherry added that the current 66 per cent business rates discount for hardest-hit firms should be increased to 100 per cent.
He also called on the government to accelerate the delivery of the £1.5bn business rates relief fund, which was “launched many months ago, but is yet to pay out a penny”.
“Surging operating costs, labour shortages and supply chain disruption are adding to the nightmare before Christmas being experienced by millions of small business owners,” said Cherry earlier this week.
“Many small businesses – especially those in the hospitality sector – which were thriving at the start of last year are now struggling to make ends meet because of a coalescing of factors beyond their control. This supposedly pro-enterprise government needs to step up.”
Sunak has yet to respond to the FSB’s requests. A Treasury spokesperson recently confirmed that the Chancellor is in California for most of the week “on a long-planned trip conducting government business.”
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