The Small Business Round-up: June 2023

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Jon Watkins Welcome to this latest FSB Monthly Roundup podcast, the go-to podcast for news, tips and important information for small businesses and self employed. This episode is the June 2023 Small Business Round-up in which we will take a look at some of the important issues hitting the headlines at the moment, and which you need to be aware of as small business owners. This month we'll be diving into a couple of topics that are particularly pertinent to small businesses right now, and where FSB is particularly active. To begin, we are going to talk about FSB's recently published 'Sunshine List', which is a list of ideas and things FSB would like policymakers to do to support hospitality and tourism businesses heading into the summer season, we'll take a look at that list with FSB's Anna Slater, and also consider how those ideas might benefit businesses in other sectors, not just hospitality, and tourism. After that, we'll hear from FSB's Alan Soady, on the issue of small businesses struggling to pay back their bounceback and other Covid loans, and the options available for those with bouncebacks. Plus, we'll tell you why paying your tax could be about to get even more taxing. Right. Thank you both for joining me. Let's get straight into this starting with you, Anna, on the topic of this Sunshine List. Now, your recent SBI Confidence Report showed a considerable rebound in confidence for accommodation and food services businesses, particularly despite still being in the Negative Zone. Can you expand on the factors driving this rebound? And what it indicates about the state of the sector?

Anna Slater Yes, well, Hi, Jon. Great to be here. And firstly, I think this renewed sense of consumer confidence really amplifies the value of the UK tourism industry. And it's also a massive indicator that our tourism and hospitality industries are dynamic. And you know, they are still alive. And with a keen eye on the needs of what the sector needs this summer, we will continue to see real growth as the summer season continues.

Jon Watkins And you know, what's on this Sunshine List as it were? Can you share some details on how each of the measures... what each of the measures are that you're proposing, and how they're going to work in practice to support tourism firms?

Anna Slater Sure, well, when we talk about the Sunshine List, we're talking about targeted and practical measures that could immediately elevate and alleviate the tourism sector. So it's not just about easing that burden on small firms, but it's also about enhancing the visitor experience. So a fundamental aspect of our Sunshine List is a fair allocation of the government's pothole funds. So all things transport effectively. And that's not just about getting from A to B, it's about the journey itself. As we know, you know, I've got experience with this myself, I'm sure you have as well. Potholes can significantly disrupt this and it causes damage to vehicles, and then that in turn creates negative visitor experiences. So it's really important that the government invests in road infrastructure, and it ensures that its funding is evenly distributed. So that's, you know, particularly in high traffic tourist areas, and then that will not only improve the overall visitor experience, but it will also support local tourism companies who rely on smooth transportation, because then that helps them run their business effectively. And then the second part of that is parking. So it's funny because when we think about tourism, parking might not be the first thing that comes to mind. But it's actually very critical due to accessibility issues. Summer parking regulations, for example, could be bought in, in tourist hotspots, or you know, even physically expanding parking options in some areas could help where it's possible to do so. And then that will ensure that any potential customer has easy access to these businesses, hotels, high streets, restaurants, and then that increases foot traffic and in turn local spending, which is what we want to see. And then another thing that the government could bring in is extra Park and Ride options at tourist hotspots. You know, we've got some of the most beautiful, very popular attractions here in the UK, but they're just not always the easiest to reach. And if they are then they have limited parking. So parking ride options really could help manage that. It will also reduce congestion on the roads and make it easier for visitors to access all locations. And then that's not just beneficial for visitors, but then it also supports the small firms who operate around these tourist hotspots because then they're the ones who will benefit from increased visitor numbers and then more visitors means plugging more money back into the economy and ultimately more support for our small businesses. And that is exactly what our Sunshine List aims to achieve.

Jon Watkins Yes, they seem like pretty common sense measures, don't they a big issue for a lot of small businesses at the moment, given the period that we've been through with disruption and Covid, and the current economic climate is is debt I understand, some 77% of small tourism and hospitality firms say they currently carry some sort of debt? Are there immediate measures that you're asking for from government and policy makers that can help alleviate some of the financial burden on these businesses?

Anna Slater Yeah, well, that's a great question, actually. So one immediate and practical solution could be raising the VAT threshold from £85,000 to £100,000. So you see, what's happening right now is that a lot of our tourism businesses are having to hold back on trading as the tax year comes to a close, because then that will mean, then that means that they're going to avoid crossing the current VAT threshold and accruing extra costs. So by increasing the threshold, we can stimulate growth and relieve some of that financial pressure, some of those financial pressures that firms are facing.

Jon Watkins And does that have an economic impact as well, presumably?

Anna Slater Oh, yeah, massively, because then that gives more firms a lot more breathing room when it comes to their tax obligations. And the current VAT threshold, it puts a cap on their potential growth, as I mentioned before, but the higher threshold will provide more businesses a freedom to operate without any constraints. And then the removal of this limit would effectively take off the financial handcuffs. And that gives them the ability to increase their operations without having to worry about hitting a financial landmine.

Jon Watkins Yeah, it makes a lot of sense. Thanks, Anna, if you as listeners are looking to find out a bit more about the sunshine list, you can simply google FSB sunshine lists, and that will surface a pretty large article on FSB's website for you to find out a little bit more. But thanks for that overview and a really good, let's have a look next at paying back Covid loans and the struggles that some small businesses are facing to repay them. Now. This is a big issue at the moment, isn't it? I know you were in the media this week, Alan talking about this. And I read that there are some 145,000 bounceback loans worth 3.8 billion pounds that are in default, alone. So what's the story? And why does there seem to be a problem here?

Alan Soady Well, Jon, these were called bounceback loans. But the bounceback, frankly, still hasn't happened. And actually, these loans were created quite early on in the pandemic, they were within a few months of lockdown, and so on. And therefore, you know, we're now three years on, and they were a lifeline at the time for many who were really really struggling, including some of those whose businesses had to be and forcibly closed because of the pandemic. But alongside all the other cost pressures alongside inflation, soaring energy bills, and all the other cost of doing business pressures that there are at the many, we keep hearing stories. And when this was featured by the BBC recently as well, they got a big response, they got lots of people from their audience getting in touch saying that I know what people are talking about here, I'm in that position as well, of where, even though, as you say, there's about 145,000 who are in arrears, that is really just the tip of the iceberg that's only about 6.5% of those who took out bounce back loans. Among the others, the vast majority still have not repaid them or not all - have not fully repaid. And within that group, we think that there are quite a few people it would seem who are struggling and who are prioritising making those payments, so they haven't fallen into arrears, but it's really, really making life difficult for them in their business. Now, if you look at the other main type of Covid loan, the Coronavirus Business Interruption Loan Scheme (cbils), fewer people took that one out, but that one did come first. It's also the one where often people were borrowing more than under the bounce back loan scheme, which was only up to 50,000. With that one, in most cases, the interest rate is not fixed. So where interest rates have been going up and up and up people with those cbils loans are really struggling even more. And unlike with bounce back loans, there isn't a system of so called Pay as You Grow, for people to have ways of maybe having a payment holiday or something like that from the cbils. And actually at the Federation of Small Businesses, we think that that should be the case for cbils, as well as for the bounceback loans. But even those with bouncebacks, as I say, are really struggling. Our research found that one in seven of those who've seen costs change recently say that the cost of debt is a significant part of that. And in amongst that, there's an awful lot of people with these bounceback loans, more than a million.

Jon Watkins Okay, and for those with bounceback loans, what are the options if they're struggling to repay?

Alan Soady Well, I mentioned something called Pay as you Grow. And this was something that at the Federation of Small Businesses, we'd asked for to help those who were struggling to pay their bounce back loans to repay them. And that was introduced as a result, and it gives three different options to people. One option is to extend the repayment period from six years to 10 years that you'd need to talk to your lender about. You can also talk to your lender about potentially having a six month period where you just pay the interest on the loan, and you're entitled to do that three times across the repayment period of your six or 10 years, you can also request from your lender to have a six month repayment holiday where for six months, you don't pay anything. But you can only do that once during the the repayment period. Now already getting on for a third of people with bounced back loans have done at least one of those three options, some people may have done all three by now. And some people have done that. And now I've run out of those options, and are still struggling to pay. But also the fact that there's been almost a third of people with bouncebacks, who've turned to one of those options to delay repayments just shows the kind of squeeze that they're causing on people's finances, you should have been informed by your bank, maybe as much as a couple of years ago that these options exist. But understandably, at the time, you maybe didn't really think that you'd need that because you assumed that the economy would bounce back by now. And you wouldn't be struggling as much as you are. So if you aren't there are those options available. Talk to your lender, and say that you know about pay as you grow, and you'd like to talk to them about what might be best for you.

Jon Watkins Yeah, it sounds like communication is always a good idea. While we have you Alan, let's turn to everybody's least favourite subject: tax. There's some bad news for those needing to do their self assessment tax returns in the next couple of months. Isn't that what's happening there?

Alan Soady Yeah, so HMRC has all of a sudden decided to close its self assessment tax helpline for three months over the summer. It says that it's redeploying staff to other helplines for other things, and it's it's saying that there are you can you can go online for help, there is something called a digital assistant. But frankly, that helpline is closed until the fourth of September, as things are just at a time when an awful lot of people are doing their self assessment tax returns, a lot of people have the 31st of July as a as a deadline for that. I mean, it's tempting to say, well, instead of making tax digital, maybe HMRC should be making tax seasonal. And so to match the helpline closing for the summer, maybe we can all have a break from our tax for the summer! But somehow, I don't think that they're going to do that. And it does leave people without that resource. HMRC is saying that also, there is a more general helpline that people can call but frankly, that is not going to be as easy or effective, we'll be able to deal with some of particularly the more complex inquiries that the main self assessment helpline would be dealing with. And there is pressure on HMRC from organisations like FSB from some MPs now and from others to reverse that decision to get that helpline back open. But as it stands, that helpline will not reopen until the fourth of September.

Jon Watkins Yes, watch this space on that one, I guess. Thanks, Alan. Really appreciate that. That brings us to the end of this Small Business Round-up for June. I'll look at the small business announcements in the headlines right now. And I'd like to say thanks again, to our guests, Anna and Alan. Thank you also to our audience for listening to this episode. As always, while I have your attention, I would just like to remind you that you can subscribe to the FSB podcast to receive regular updates and guidance on the big issues affecting small businesses. And do please also remember that you can find a whole host of additional webinars, podcasts and other brilliant content at the FSB website at fsb.org.uk . Many thanks. ​

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