2020 looked promising for UK small-medium-enterprises (SMEs). Britain had a majority UK Government; Brexit outcomes were becoming clearer and business confidence began to grow. However, following the development of Covid-19, economic markets began to fall, supply-chains slowed or became dismantled and sales for businesses on the high street started to drop or in many cases stopped altogether.

Covid 19 event timeline

How is this mix of events affecting SMEs and what can they do to minimise the impact on their business?

Covid-19 challenges that SMEs are facing

Some of the key issues affecting SMEs have included:

  • Managing cash flow when there has been a reduction in sales. Even though businesses still have to manage fixed recurring costs associated with rent, insurance, staffing/employee pay and commissions, stock or product manufacturing and local/international product shipping.
  • Coping with disrupted supply chains and distribution challenges has meant SMEs spending more time examining the suppliers they work with to identify where the main vulnerabilities in that ecosystem lay. For example, Amazon FBA sellers are currently being impacted due to their focus on essential goods as they’re struggling to keep up with consumer demand.
  • Understanding what their duties are as employers to their staff, such as supporting their staff with their well-being, better controlling the distribution of Personal Protective Equipment (PPE) for their employees and supporting employees work from home.

Due to the current UK Government measures related to people working from home, SMEs have had to increase their use of technology and software to facilitate online meetings, information sharing and allow employees to carry out their day to day duties. The guidance from the UK Government states that individuals should only travel to a workplace if the work they do cannot be done at home. UK Cabinet Office guidance suggests that businesses that don’t follow the measures will be forced to close down [1]. It is not clear whether this is intended to refer only to businesses which have been ordered to close or extends to cover businesses that have asked their employees to attend a workplace when they can do their work in their homes.

Increased sickness is another challenge SMEs are facing, where employee absence may put more pressure on other employees to work longer hours to cover those who are off. How employees are treated by SMEs at this time is being scrutinised by the UK Government against the employment law and wider legislation which had been in place before Covid-19 became a pandemic. Section 44 of the Employment Rights Act 1996 provides workers with the right to withdraw from and refuse to return to an unsafe workplace [2], which SMEs need to consider for any of their employees who are the front line and still working in the business instead of working from home.

Ways SMEs can offset the impact of Covid-19

The UK Government recently announced that “their Plan for People’s Jobs and Incomes, will: protect people’s jobs; offer more generous support to those who are without employment; strengthen the safety net for those who work for themselves; and help people to stay in their homes” [3]. While a lot of business have already implemented the following:

  • Employees working from home
  • Furloughing employees, which is when the business asks employees to take a leave of absence from work. Currently, employers have asked employees to take a percentage cut to their salaries as well
  • Making redundancies
  • Reducing office opening hours/shifts
  • Closing their office (shifting focus to online) or closing their operation down temporarily

There is a range of initiatives and schemes which SMEs may not be aware of, such as [4]:

  • Coronavirus Job Retention Scheme: all UK employers with a PAYE scheme who started on or before 28 February 2020 will be eligible to claim for 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month. Plus, the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage [5]. Employers can access this scheme anytime during this period.
  • Deferring VAT and Self-Assessment payments: the HMRC is deferring all VAT payments until June 2020. Any deferred VAT is then due by 31 March 2021. Returns must still be filed by the SME. All UK VAT registered businesses are eligible to access this scheme [6]. The 31 March 2020 update confirms delays for payments-on-account. It delays the UK Governments phase 2 changes to the Making Tax Digital (MTD) for VAT regulation. The VAT Mini One Stop Shop (MOSS VAT) which is a way of paying VAT on supplies of certain digital services will be excluded from a three-month VAT holiday. Taxpayers on direct debits must cancel them if they wish to take advantage of the VAT holiday.
  • Accessing the HMRC Time To Pay Scheme: aims to help with tax, which gives all UK SMEs who will be automatically eligible to access the scheme [7] the ability to set up a structured payment plan for debt repayment over an agreed time. The HMRC will likely allow companies more time to pay the overdue tax due to the virus, but the exact amount of time will be decided on a case by case basis.
  • Statutory sick pay relief: is available for UK SMEs to access the scheme [8], who employ no fewer than 250 employees as of 28 February 2020.
  • Having a 12-month business rates holiday: which is only for all UK retail, hospitality, leisure and nursery businesses who would be eligible to access this scheme [9].
  • Using grant funding: this covers £25,000 for retail, hospitality and leisure businesses with property to access this scheme [10] with a rateable grant (If you receive the Small Business Rate Relief for an occupied property, including a nursery or childcare facility, and the rateable value of your property is £15,000 or less, you are entitled to a rateable grant payment of £10,000) value between £15,000 and £51,000 for them to use.
  • SME grant funding: allows UK businesses to access this scheme [11] to use up to £10,000 of rate relief or rural rate relief. Further eligibility states that SMEs should be in receipt of small business rate relief or rural rate relief as of 11 March 2020 and that business must occupy a property.
  • Coronavirus Business Interruption Loan Scheme: offers loans of up to £5 million for SMEs who have an annual turnover of no more than £45 million through the British Business Bank. Access the scheme [12] which aims to support long-term viable businesses who may need to respond to cash-flow pressures by seeking additional finance.
  • A new lending facility: which comes from the Bank of England to help support liquidity among larger firms, helping them bridge coronavirus disruption to their cash flows through loans. Companies – and their finance subsidiaries – that make a material contribution to the UK economy will be eligible to access this scheme [13].

These schemes are designed to help SMEs offset the current impact of Covid-19 and help them to prepare for the long-term business effects of this virus. The UK Government’s business support [14] site and their financial support for businesses [15] during coronavirus site are both useful resources.

How WorldFirst can help

WorldFirst’s team of account managers are experts in helping SMEs navigate the complex world of international payments and foreign currency exposures. The FX specialists at WorldFirst can support business owners and advisors focus their attention on their customers, staff, and business performance.

Other WorldFirst resources SMEs can use at this challenging time are the Covid-19 and the impact on financial markets and Covid-19 and the Government rescue package discussion webinar recordings. Contact WorldFirst today, speaking with London based account managers to discuss your specific needs or visit our website to see how WorldFirst has helped over 250,000 customers worldwide who have put their trust in WorldFirst.

 

[1] https://www.gov.uk/government/publications/full-guidance-on-staying-at-home-and-away-from-others/full-guidance-on-staying-at-home-and-away-from-others
[2] http://www.legislation.gov.uk/ukpga/1996/18/section/44
[3] https://www.gov.uk/government/speeches/the-chancellor-rishi-sunak-provides-an-updated-statement-on-coronavirus
[4] https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses
[5] https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
[6] https://www.businesssupport.gov.uk/vat-deferral/
[7] https://www.gov.uk/difficulties-paying-hmrc
[8] https://www.gov.uk/guidance/claim-back-statutory-sick-pay-paid-to-employees-due-to-coronavirus-covid-19
[9] https://www.gov.uk/government/publications/business-rates-retail-discount-guidance
[10] https://www.businesssupport.gov.uk/cash-grant-for-retail-hospitality-and-leisure/
[11] https://www.businesssupport.gov.uk/small-business-grant-funding/
[12] https://www.businesssupport.gov.uk/coronavirus-business-interruption-loan-scheme/
[13] https://www.bankofengland.co.uk/news/2020/march/the-covid-corporate-financing-facility
[14] https://www.businesssupport.gov.uk/coronavirus-business-support/
[15] https://www.gov.uk/government/collections/financial-support-for-businesses-during-coronavirus-covid-19