Oral answer (Lords) on Covid-19: Small Businesses - Jan 13

Thursday, 14 January 2021 10:14

Asked by

Lord Stevenson of Balmacara
To ask Her Majesty’s Government what assessment they have made of the number of small businesses at risk of permanent closure as a result of the restrictions put in place to address the COVID-19 pandemic; and what additional support they plan to provide to such small businesses.

The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
Throughout the pandemic, the Government have recognised the need to support businesses through the impacts of Covid. The Government continue to deliver a comprehensive package of measures to provide that support, including loan guarantees, business grants, tax deferrals and the Coronavirus Job Retention Scheme. We will continue to keep the approach under review and continue to engage with the business community.

Lord Stevenson of Balmacara (Lab) [V]
My Lords, the ONS’s index of services shows that, despite the Government’s welcome support, all but a few sectors of the economy are significantly down on previous years. The travel, hospitality and creative industries are in deep trouble, registering between 50% and 90% cuts in activity. We have consistently called for a differential approach to sectors with a high level of freelance, seasonal and self-employed workers. Does the Minister agree that it is important to retarget government support going forward?

Lord Callanan (Con)
We keep all these matters under constant review. We are supporting self-employed people with the fourth income support grant. We are providing an extra £4.6 billion to protect UK jobs and businesses. Businesses that are self-employed, freelancers and sole traders can benefit from other measures such as mortgage holidays, VAT relief and business loans with generous repayment terms.

Lord Dodds of Duncairn (DUP) [V]
My Lords, many small businesses and retailers say that having an online presence is a major element in creating sustainability for their business in the face of repeated closures. We all want our high streets to succeed and, therefore, the way forward is a mixed click and brick model for small businesses. Can the Government outline what they are doing to help small businesses get online or improve their online presence?

Lord Callanan (Con)
The noble Lord makes an important point. There are a range of assistance schemes provided by many local authorities and government agencies to help and support them.

Baroness Verma (Con) [V]
My Lords, I refer to my interests as set out in the register. Would my noble friend help me understand what help will be given to our high streets? I am particularly concerned about my own city, Leicester, where so many shops have closed down since the pandemic. Can my noble friend please see what more can be done to help those in the supply chain to the hospitality and leisure sectors, especially those in multi-occupancy buildings? They have not received as much support as they possibly could have.

Lord Callanan (Con)
I will certainly bear the comments made by the noble Baroness in mind. Local authorities across England have been allocated a further £500 million in discretionary funding via the additional restrictions grant to support businesses from 5 January. This could include businesses supplying the retail, hospitality and leisure sectors or businesses outside the current business rates system which have effectively been forced to close

The Earl of Clancarty (CB)
My Lords, are the Government looking at the devolved Administrations? In some cases, they have been more agile in addressing gaps in support for small businesses, such as Northern Ireland’s Covid Restrictions Business Support Scheme which provides grants for supply chain businesses. A similar scheme is operating in Wales. This would certainly give some help to the live music sector, which continues to be hard hit. Technical supply companies have seen a disastrous 95% drop in their revenues.

Lord Callanan (Con)
As I said earlier, we keep all these matters under review. We are conscious that our scheme is one of the most generous in Europe, with £280 billion-worth of support. Of course, we are always willing to learn lessons from the devolved Administrations or other countries.

Lord Allen of Kensington (Lab) [V]
My Lords, the FSB say that around 70% of small businesses are carrying some form of debt. Almost half of them—some 47%—are using personal loans, family loans, overdrafts, their own credit cards and personal mortgages on their properties to support their businesses. Many, including 710,000 company directors who pay themselves through dividends only when their business is in profit, have been excluded from any form of personal support. This is because the Treasury seems to have put this into the “Too difficult” box. At some point, many of these entrepreneurs will lose not only their businesses but their homes and possessions too—notwithstanding the stress, anxiety and mental health issues. What will the Government do now to stop this happening?

Lord Callanan (Con)
We are aware of the issue of dividends highlighted by the noble Lord. We have looked at that, but it has proved very difficult to separate different kinds of dividends. However, we have amended some of the terms of the bounce-back loans—for example, no repayments are due during the first 12 months of the loan term. This gives businesses the space they need to get through the difficult period without the worry of directly repaying in the immediately following months.

Baroness Bakewell of Hardington Mandeville (LD) [V]
My Lords, large villages and small market towns are dependent on a varied patchwork of small businesses for both their economic and community well-being. Many of these have already closed during lockdown. Whether they provide retail outlets, services such as hairdressers, or are small engineering subcontractors, they all need and deserve support. Can the Minister give reassurances that rural areas will not be forgotten when considering support?

Lord Callanan (Con)
Rural areas are badly affected, as indeed are city areas. Like other SMEs, rural businesses can access support including loan guarantees, business grants and the tax deferrals I referred to. Those needing advice can now access free advice on the right finances from local government-backed growth hubs, which are part of the LEPs. But I totally accept the point made by the noble Baroness.

Lord Shinkwin (Con)
My Lords, given that the OBR has warned that the UK economy will shrink by 11.3% this year—the biggest fall for 300 years—and that unemployment will peak in the second quarter at 7.5%, and given that the Chancellor said in his recent spending review that we are facing an “economic emergency”, will the Minister agree with me that, as soon as we possibly can, we need to shift the focus from saving lives to saving livelihoods and thereby signal our support to small business people across the UK?

Lord Callanan (Con)
I agree with my noble friend that, as soon as we possibly can, we need to lift these restrictions to get the economy moving again, but we are indeed facing a public health emergency at the moment, as he has said.

Lord Sikka (Lab) [V]
My Lords, SMEs are also destroyed by unfair insolvency laws, which enable secured creditors to walk away with most of the proceeds from the sale of a bankrupt business’s assets, leaving next to nothing for unsecured creditors, including SMEs. The Carillion bankruptcy affected nearly 30,000 SMEs. Will the Government consider legislating so that SMEs have a higher priority in corporate bankruptcies?

Lord Callanan (Con)
The noble Lord makes an important point, and, of course, we constantly review all these numbers. We last looked at the insolvency provisions in recent legislation, and it is always difficult to get the balance between different creditors right when there are insufficient funds available.

Lord Alton of Liverpool (CB) [V]
My Lords, I return to the question of the noble Baroness, Lady Verma. Will the Minister commit to an empirical evaluation of the impact of Covid-19 on our already embattled high streets—in relation to footfall and spending? As the experience in different parts of the country has been bumpy and uneven, will he spell out how the Government are working with local authorities and chambers of commerce to ensure a tailored response, according to local circumstances?

Lord Callanan (Con)
We are fully committed to supporting businesses that make our high streets and town centres successful. As the nation responds to the impact of Covid-19, I can tell the noble Lord that we are investing £830 million through the future high streets fund in 72 areas across England, helping to renew and reshape high streets in our town centres.

Lord Cormack (Con) [V]
Does my noble friend accept that these constant reviews have not done much to help many of the self-employed, a group that includes some of the hardest-working people in our country? In the creative industries, particularly music, there have been some horrific stories. Can we have an immediate review of the help for the self-employed?

Lord Callanan (Con)
In my earlier answer to the noble Lord, Lord Stevenson, I outlined the help that we are giving to self-employed people, with the fourth income support grant. We are providing an extra £4.6 billion to protect UK jobs and businesses. We accept, of course, that a lot of these schemes were put together quickly and in haste, and that we need to keep them under constant review to ensure that as many people as possible are receiving that help and support.

Lord Dholakia (LD) [V]
My Lords, we are aware that our diverse communities are substantially and adversely affected by the present pandemic. I have received a large number of complaints about SMEs, including post offices, pharmacies and corner shops, that may go down because of a lack of finances and other resources. I ask the Minister, as I have done before: will he ensure that these businesses are adequately consulted and assisted before they go down, never to recover?

Lord Callanan (Con)
The noble Lord makes a vital point. I and my ministerial colleagues regularly having meetings with all the various business representative organisations to ensure that the support we are able to give is carefully tailored, targeted and available to as many different businesses as possible.