A sustained recovery in the British economy will depend on small businesses being able to “return to normal” and grow through innovation once the restrictions are lifted, a Centre for Policy Studies webinar found on Wednesday.
John Glen, economic secretary to the Treasury, told delegates at the virtual Roadmap to Recovery session that the right interventions must be made to ensure small firms, which make up 99 per cent of all UK businesses, can thrive and lead the economic recovery once the pandemic is over.
“There have been £45 billion ($62.6bn) of bounce-back loans and the business failure rate last year was lower than normal at about 25 per cent … so we need to create the conditions where businesses can have support with working capital, so that they can actually grow forward," Mr Glen said.
Britain's coronavirus-ravaged economy shrank 9.9 per cent in 2020, the biggest annual fall in output since modern records began. Meanwhile, public sector borrowing soared to £34.1bn in December, taking government borrowing since the start of the financial year in April to a record £270.8bn.
While the pandemic has hurt the business community at all levels, at least 250,000 of the 5.9 million small companies in the UK are set to close in 2021 unless the government provides more assistance, according to the Federation of Small Businesses.
The government has issued 1.4 million loans to prop up businesses as part of its £280 billion support package since the start of the crisis.
Mr Glen said UK finance minister Rishi Sunak is expected to “do everything he can” at the March 3 budget to support small businesses post pandemic and ensure the maintenance and creation of jobs.
The Treasury will also focus on setting interventions that will enable businesses to operate freely including a soon-to-be unveiled support scheme for bank lending, Mr Glen said.
“We must support SMEs and we've got to be sensitive to the range of experiences across different sectors, but recognise that a sustained recovery is going to be based on them getting back to normal and growing through the innovation at these challenging times.”
Gary Turner, cofounder and managing director of Xero, a platform used by 600,000 small businesses to manage their accounts, said technology will play a key role in ensuring small businesses can lead the UK’s economic rebound.
Mr Turner set up Xero in 2009 and has helped to transform it from a company of three employees with a turnover of £50,000 to one employing thousands of people across the globe with a turnover of more than £100 million last year.
While small firms hold the key to job growth, they face significant challenges, he said, but four strategies can set them on the right track including the acceleration of digital adoption to ensure companies are ready for any future disruptions.
The second strategy is to put in place new legislation to end unfair payment practices and ensure small businesses have the cash flow to kick-start the new economy. The third is to champion the work of accountants and business coaches, who have effectively been "the key workers of the pandemic" by helping small businesses survive the double hit of Covid and Brexit.
Finally, Mr Turner called for the small business community to have better representation on the political stage.
“The small business economy must have a greater voice to argue for the measures that will drive growth and economic recovery,” Mr Turner said.
Claire Walker, co-executive director of policy and campaigns at the British Chamber of Commerce, said the government’s exit strategy from the pandemic, set be unveiled on February 22 by Boris Johnson, will be “a key test of business confidence”.
Expectations are high with the BCC hoping the government will offer businesses a clear roadmap out of the crisis and reassure them that long-term support will remain in place.
“Businesses have been really shocked not only by the pandemic, but by the stop-start nature of the pandemic, which has almost been the most punishing thing.
“We would like to see a whole year of support in 2021 so that businesses know that this will be the support as we move out of lockdown.”