Our small firms are vital to Britain’s recovery
THE big financial story of the moment is the economic destruction resulting from coronavirus and repeated lockdowns – and rightly so. On Friday, the latest data on the economy’s shrinkage – a 2.6 per cent contraction in November – worryingly confirmed that we are heading for a ‘double-dip’ recession.
In other words, another period of economic decline after last year’s recession and subsequent bounceback. All rather frightening.
For many small businesses, the situation is becoming dire. As my colleague Sarah Bridge reports above, hundreds of thousands of entrepreneurs – the heartbeat of our economy – are in danger of losing their livelihoods unless the Government comes to their help.
Like other businesses, they have been derailed by lockdown. But, unfairly, they are being denied financial assistance because of inconsistencies in the Government’s approach to the awarding of grants. Flaws that Chancellor Rishi Sunak should iron out as a matter of urgency.
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big financial issues facing households and small businesses. This is top of the list. We need these entrepreneurs to survive in order to drive the economy forward as the coronavirus threat weakens and lockdown is no more – ensuring we move from a double-dip recession to a double bounceback.
NOBODY should shed a tear for the eight former board members of collapsed construction company Carillion. This follows a legal bid by the Government to bar them from becoming company directors for up to 15 years. Although the action taken against these former stewards of a FTSE 100 company by new Business Secretary Kwasi Kwarteng is unprecedented, it is the right one. At various stages, they presided over a business that employed 19,500 workers in the UK until it went into liquidation in 2018 with debts of £1.5 billion.
It was a company that a joint parliamentary select committee report described as being modelled on a ‘relentless dash for cash, driven by acquisitions, rising debt, expansion into new markets and exploitation of suppliers’. And one that put the payment of dividends to shareholders ahead of ensuring the company’s defined benefit pension schemes for employees were adequately funded. It’s a shame therefore that a new pension law passing through Parliament this month – and born out of a Conservative manifesto pledge to protect ‘ pension pots from being plundered by reckless bosses’ – will not apply to these individuals.
Under the Pension Schemes Act, it will now be a criminal offence for a company official to engage in any conduct that endangers the accrued pension benefits of workers. As well as the risk of being jailed, there is the potential for personal fines of up to £1 million.
According to Laura Amin, of pensions consultant Lane Clark & Peacock, the legislation will have ‘profound implications’ for more than 5,000 businesses that run defined benefit pension schemes.
She says it will need to be considered – ‘in the room’ – every time a corporate decision is taken.
She adds: ‘Any company decision which materially affects the chance of pensions being paid in the future could be challenged in a court of law, potentially years after the event. And if the court decides that someone should have been aware of the impact of the decision they were making, they can find themselves facing a hefty fine or worse.’
It will be interesting to see what impact the law has on corporate decision making and whether The Pensions Regulator (a bit of a wet blanket at the best of times) uses it.