Small businesses call for support amid recession

For the first time in 11 years, the UK has fallen into a recession. Between April and June, the economy slumped into its biggest decline on record as lockdown measures caused by the coronavirus pandemic took their toll.

With household spending plummeting and retail and hospitality businesses forced to shut their doors, the economy shrank by 20.4% compared with the first three months of the year, according to official figures.

The drop was triggered by the closure of shops, hotels, restaurants, schools and car repair shops, the Office for National Statistics said. The services sector, which powers four-fifths of the economy, collapsed, dropping by its biggest quarterly decline on record.

As lockdown restrictions ease, signs of a bounce back have emerged. In June, the economy grew 8.7% on a monthly basis, building on growth of 1.8% in May. However, GDP in June remained a sixth below its level in February.

Alpesh Paleja, lead economist at the Confederation of British Industry, said that cash flow constraints are still hitting businesses, “and with the pandemic not going away anytime soon, a sustained recovery is by no means assured”.

“The dual threats of a second wave and slow progress over Brexit negotiations are also particularly concerning, underlining the need for maximum agility from Government on both these issues, allowing a greater focus on the economy’s long-term future,” Alpesh said.

Small businesses call for “most pro-business Budget ever” to revive the economy
With small firms making up the vast majority of the UK’s business community, “we won’t recover from this incredibly sharp recession unless they’re firing on all cylinders,” said Mike Cherry, national chairman of the Federation of Small Businesses.

The FSB has called for the “most pro-business, pro-self-employed Budget ever” this autumn. Not only should the Government focus on lowering the cost of innovating and bringing new goods and services to market, but it should also avoid tax rises, the group said.

“A cut to employer national insurance contributions, backing for the New Enterprise Allowance and Start-Up Loans Programme, ambitious investment in our infrastructure – not least broadband – networks, taking more small firms out of the regressive business rates system and ending a worsening £23 billion late payment crisis are all a must,” Mike added.

The FSB also stressed the importance of guaranteeing that the hundreds of thousands of firms that took out bounce back loans will not have to start paying them back until they’re making a profit: “Such an assurance will encourage them to invest and expand today, rather than hoarding cash for fear of what’s coming down the line.”