Emerging from the pandemic – support for the recovery

The pandemic saw the government design and roll out a series of measures with the aim of helping UK businesses survive and weather the storm. This help included the furlough scheme, deferral of VAT payments and business rates holidays. A recent British Business Banks report on Small Business Finance Markets examined what happened in 2020 to build a comprehensive picture of where businesses sought support during this time. The report showed that, from the businesses surveyed, there was a surge in applications for external financial support, including government and local grants, among small and medium sized businesses (SMEs), with almost half (45 per cent) of those surveyed saying they applied for external financial support in 2020, compared to 13 per cent in 2019.

Furthermore, latest figures from the Treasury published in March 2021 reported that businesses across the UK have to date benefited from over 1.6 million government-guaranteed loans worth £75.1 billion through schemes delivered by the British Business Bank, aimed at supporting cash flow during the crisis.

Businesses who have taken out a Bounce Back Loan over the last year will now be deciding how and when they start repaying that loan. The scheme began in May 2020 and included a one-year payment holiday, so the first monthly repayments fall due from May 2021.

To help businesses further, the Chancellor announced back in September 2020 that businesses would be able to use a series of options for Bounce Back Loan to help those borrowers get back to regular trading. These measures, known as Pay As You Grow, give businesses more time and flexibility to pay back the loan. Once a business starts making regular repayments there are a variety of options, allowing them to extend the loan term, ask for a six-month payment holiday or pay the interest only for up to three periods of six months.

Even in this harshest of economic climates many businesses have been able to keep trading, start up or even thrive. If the recovery is to gain real momentum, the UK will also need to continue to nurture and support those entrepreneurs as they both set up and grow their businesses. Despite the pandemic and the sizeable impact that it has had, and is still having on them, there are signs that there is still an appetite to start new businesses.

In 2012, long before anyone had heard about COVID, the Start Up Loans programme was created to encourage entrepreneurship in the UK, increase the rate of business creation and improve survival prospects.

The programme offers new businesses loans between £500 to £25,000 with a fixed interest rate of 6 per cent, and was specifically aimed at businesses who might otherwise have struggled to secure backing from high street lenders. As well as finance, the scheme also provides free mentoring and support – including courses from the Open University – to individuals who are starting a new business or who have been trading for less than two years.

The Start Up Loans programme issued over £137 million of loans to over 11,300 people across the UK in 2020-21. In fact, July 2020 was the programme’s busiest month since the scheme was founded in 2012, with many of those supported identifying new trends or demand as a result of the pandemic and taking the opportunity to launch their first enterprise. Many businesses have been forced to pivot, change their business model or go online and increase social media activity.

But it’s not only the amount of finance and number of businesses that matters, it is also where that support is going. Of the 80,000 loans delivered over the last nine years, over one in five (21 per cent) loan recipients come from ethnic minority backgrounds and two in five (40 per cent) loan recipients are women. Furthermore, one in three (33 per cent) were unemployed when they applied for a loan.

The aim has always been to support budding entrepreneurs from all walks of life to make their business dreams a reality. This means ensuring that under-represented groups, be they from minority ethnic backgrounds, unemployed or women, have the same opportunities as anyone else.

Government-backed finance for people looking to start their own businesses has never been more important than it is currently. As well as being key to economic growth over the long term, government support for small businesses around the UK continues to drive investment into the regions. Therefore, as the UK tentatively moves forward from lockdown, there is a real opportunity that entrepreneurs keen to start new businesses could play a fundamental role in helping to re-start the economy and fuel the recovery.

Warren Ralls, managing director, UK Network