Published on April 17th, 2020 | by The GC Team0
We thought it was all over. It’s not now.
Nobody saw this coming. No sooner do we get a respite from the ubiquitous “B” word than we’re hit with the far more devastating all-consuming problem of the “C” word. What it has done – and is still to do – to our industry is beyond the scope of these few hundred words. Suffice it to say that just a few short months ago, when the UK left the EU, we wrote: “We know we have problems, but we also know we are able once again to give them our full attention.” False dawn, if ever there was one.
All we can do now is look at what we can do, and what’s being done to help us, and try to see a way to some sort of post-COVID-19 future.
Our new Chancellor, Rishi Sunak, bounded onto the scene with youthful vigour, a repetitive refrain of “Whatever it takes… Whatever it takes” like some Status Quo song that never made the album, and a multi-billion pound package of help for businesses. Some of it is very welcome. The suspension of business rates is a massive relief to retailers. Can we hope it will be followed in better times by a proper reform of the system to relieve retail of the vastly disproportionate burden it bears? The job retention scheme, allowing businesses to furlough staff while the Government pays 80% of their wages, looks good on paper. But the Government portal through which businesses need to apply won’t be up and running until at least the end of April. Nobody knows how it will work in practice; the money is urgently needed now.
The suspension of VAT and PAYE payments is a temporary relief. But businesses will still have to pay these bills some time, and there’s a danger that small businesses will use the money to ease cash flow and face an unaffordable reckoning later.
The loan scheme – with the Government guaranteeing loans to be offered by banks to businesses at “attractive interest rates” is already proving problematic.
The problem is that Mr Sunak is a City boy to the core, used to thinking in billions and not appearing to understand what a really “small” business is, or the challenges it faces. So, in devising a scheme to make money available to small businesses he can only see one route: via banks and financial institutions. Hence, banks are offered Government guarantees for loans that remain 100% the liability of the borrower. The banks’ risk is reduced, the borrower takes the risk, and the taxpayer (that is, ultimately, the borrower) puts up the guarantee. And with all that, the language is all about “encouraging” and “expecting” the banks to do the right thing. Didn’t we learn back in 2008/9 that banks always see the “right thing” as what benefits them most?
In any case, what small business can commit to borrowing when revenue has virtually dried up and nobody has a clue when – if ever – business will pick up?
We’re already getting anecdotal evidence that banks are trying to divert applicants onto their own, more expensive, loan “products,” or refusing applications on arcane grounds.
When will somebody learn that any financial model which relies on the public spiritedness of financial institutions isn’t going to work? And that some time, somebody has to question the convention whereby banks and financial institutions are able to dictate the terms on which we, the “real” economy, are allowed to go on working for them.
We don’t hold out much hope for any change on that score. In the meantime, set up, use, expand your online presence and all the social media channels at your disposal. You’re still here. Your customers are still there, and at the moment most accessible via the internet.