Issue of the week: saving small business
Will new moves to shore up smaller companies prevent the permanent “scarring” of the economy?
The Coronavirus Business Interruption Loan Scheme (CBILS) “has by a long chalk been the most disappointing bit of the Government’s radical rescue for commerce”, said Alex Brummer in the Daily Mail. The Chancellor’s “hurriedly created plan” was “full of holes” – not least a reliance on the “neophyte” British Business Bank, which has none of the experience of its German or US counterparts. And many high-street lenders haven’t helped. “Some, notably Natwest, have risen to the task. Others, such as Lloyds and Barclays, have been far too rigid.” Santander, meanwhile, has reportedly only managed to deal with 2,000 of the 15,000 applications it has received. The scheme had three basic problems: the bureaucracy was too complex, the banks were unhappy about carrying the 20% risk not guaranteed, and many smaller borrowers lack experience. Thank goodness, then, the Government has stepped up to the plate and taken on 100% of the risk. Smaller businesses are the “backbone” of the UK’s entrepreneurial economy – their disappearance would have been “catastrophic”.
The Chancellor, Rishi Sunak, has been under pressure from Tory MPs to tackle complaints about the dearth of so-called “bounceback loans” with a full guarantee, said the FT. The banks, needless to say, are all in favour – though senior bankers complain they “were left in the dark” about Sunak’s decision to up the lending ceiling from £25,000 to £50,000. The task of finding “the right level of support for companies in an economy that is half open and half closed” was always going to be difficult, said Nils Pratley in The Guardian. The question, though, is whether this guarantee comes too late. “The much-feared ‘scarring’ of the UK economy may be happening already.” The latest PMI survey of business activity in April was “many degrees worse than any recorded during the 2008 crash”, and “offered no support to the idea that the recovery will be rapid and V-shaped”.
Let’s look on the bright side, said Russell Lynch in The Daily Telegraph. Beyond the grim headlines, there are signs the “broad strategy” on shielding companies and their staff is working. The latest figures show a “rapid fall in the pace of company liquidations during April after an ugly March spike”. It seems strange to call this a “success”, and clearly the Government’s support schemes haven’t been working perfectly. “But arguably, the picture on jobs and insolvencies shows the worst of the potential economic damage being contained so far.” The PM has drawn on Cicero for inspiration in his approach to the menace of coronavirus. He might take comfort from the words of Horace, too: “nil desperandum” – “never despair”.