- Up to 9 million jobs at stake without action to extend
business support, including cash injections in return for share
of companies
Almost 600,000 UK employers are at risk of business
collapse in the spring without an urgent extension of government
support, according to new analysis by the IPPR think tank.
Between them they account for one third of business
turnover and employ some 9 million
people, whose jobs could be lost if the cash crisis for
firms of all sizes is not quickly addressed, IPPR warns.
Existing business support schemes are currently due to end
in late March and April, including loan guarantees, the business
rates holiday and furlough support. Most companies will soon be
expected to begin repaying government-backed loans made during
the pandemic, and to start paying backdated VAT bills for the
past year.
IPPR is calling for rapid action by the chancellor to save
the businesses on which UK economic recovery will depend when the
lockdown is gradually eased, by extending and enlarging business
support now. New IPPR analysis has found:
-
The number of firms with less than three
months’ cash reserves, considered a danger point for
a business, rose sharply over the four months to the end of
January – from one in four to one in three -
despite two new rounds of cash grants for firms compelled to
close during lockdown.
-
Small businesses – those employing
fewer than 50 people - are at greatest risk, with 40
per cent now having less than three months cash
buffers.
-
Half of all firms involved in hospitality, food
and other services are now dangerously low on cash,
as are 40 per cent of those in the arts,
entertainment and recreation sector - with almost all sectors
significantly shorter of cash than in the autumn (see table
in Notes section below)
In a short paper published by IPPR’s Centre for Economic
Justice today, the think tank calls on the chancellor to take
three key steps to prevent unnecessary business collapse and
enable firms to pick up faster when the hoped-for economic
recovery gets under way:
-
Remove the looming cliff-edge for
existing support schemes, by extending them until the economy
is fully open again
-
Change the lump-sum system of grant
support so it is more closely targeted to firms’
needs - such as making grants proportionate to a firm’s
normal revenues, as in Germany
-
Extend grant support beyond firms
obliged by law to close, so that struggling businesses that
supply them are also assisted
Carsten Jung, IPPR’s senior economist,
said:
“This is a moment of great peril for more than half a
million UK employers as their cash reserves run perilously low
and their businesses hang on by a thread. More firms are already
at risk than at any time during the pandemic began, and in the
worst hit industries such as hospitality and the arts, at least
two in five employers are in the cash danger zone.
“In just a few weeks, UK businesses face a dangerous
precipice when the many kinds of government support that have
kept them going for a year are suddenly taken away. For the sake
of the economic recovery, businesses should be given a boost. The
time for action to save our economy is now.”
George Dibb, head of IPPR’s Centre for Economic
Justice, said:
“Millions of people’s jobs and livelihoods depend on
the chancellor stopping firms going broke just as the pandemic is
coming under control, and ensuring that they have enough cash not
just to limp through this crisis but to come roaring out of it
when lockdown ends.
“By extending and improving the current support
schemes, and by taking the new route of injecting cash into firms
in return for a long-term stake in their future, the government
can ensure that our best businesses survive and can leap back
into action as our economy recovers from this long
hibernation.”
