‘Clear guidance needed to help small businesses recover’

By Seema Malhotra

and Heston, and shadow employment minister

SMALL businesses are the backbone of our economy. They have been hit hard by the lockdown and the slow steps back to trading.

SMEs [small and me­dium-sized enterprises] account for three-fifths of the employment and around half of the turn­over. Total employment in SMEs was 16.6 mil­lion (60 per cent of the total), while turnover was estimated at £2.2 trillion (52 per cent)[1]. Of these, around 250,000 are ethnic mi­nority-led, contributing an estimated £25 billion to the UK economy.[2]

Any hit to small busi­nesses will be a big hit to the national econo­my. Analysis over the last few weeks suggests that businesses are now re-opening, with 10 per cent remaining closed compared to 24 per cent in the week follow­ing the lockdown.[3] Yet smaller businesses have been harder hit, with 17 per cent of SMEs re­porting turnover had dropped by up to 20 per cent; 22 per cent report­ing a drop between 20 and 50 per cent; and 18 per cent seeing a drop over 50 per cent.

It will take these small businesses time to recover, especially those in the hardest hit sectors. This is why the Federation of Small Businesses has called on the government to encourage local trading, ensure public sector procurement is fully ac­cessible to small busi­nesses during the re­covery, and provide fur­ther support for small businesses with em­ployment costs beyond the end of the Job Re­tention Scheme.[4]

Beyond the econom­ic response, the govern­ment needs to get Test, Track and Isolate fully operational and restore confidence in the health response so that the economy can grow. This is even more criti­cal for BAME commu­nities, who have seen a double hit in terms of the health impact and the economic fallout from this crisis.

Instead what we have seen is a frustrating drip-feeding of advice that has sometimes raised more questions than answers. Certainly, that is what we have had from local busi­nesses in Hounslow. Many small businesses were shocked to find out they were not eligi­ble for the Coronavirus Business Grant. The lo­cal authority tells me that that the discretion­ary business grants de­signed to plug the gaps in the initial round of funding will not stretch far enough to support all those who need it.

There is an important aspect to this which shows how the interests of large and smaller businesses are inter­connected. Aviation shows this well, a sector dominated not just by large players, but by small businesses who form much of the sup­ply chain. Larger busi­nesses like Heathrow should review procure­ment processes post lockdown to ensure in­clusion for local SMEs. Where SMEs can be en­gaged early as part of the supply chain, they can plan ahead in order to be able to hold on to the employment they can. This is particularly important as the fur­lough scheme begins to scale down. That’s why Labour has also called for longer schemes for harder-hit industries and for greater flexibili­ty in furlough.

We need to be seeing more action now for an inclusive recovery. This week, I will be speaking at a Fabian Society event marking three years since the Taylor Review of modern work­ing practices reported on how to achieve good secure work in a chang­ing labour market. As yet, only seven of the 53 Taylor Review recom­mendations have been legislated for.

The economic fallout from Covid-19 has ex­posed the greater risk to jobs and incomes of those in precarious em­ployment, with women, single parents, BAME communities, young people and the self-em­ployed being hardest hit.

As the outbreak slows, communities need to work together and en­courage friends, neigh­bours, and family to take the public health advice as seriously as they did at the beginning and adapt responsibly to changing circumstances.

But the government must do more to give clearer guidance and al­so get Test, Track and Isolate fully operational to help build vital pub­lic confidence. Conflict­ing advice from the gov­ernment only hinders the fight against the vi­rus, and additional con­fusion can happen when confused guid­ance is translated into different languages, as happened with face masks. Clear communi­cation is vital in com­batting the spread of Covid-19 and needs to be a greater focus now as a matter of urgency.