What you need to know this week
Our round-up of the key business updates and insights for you
January 22, 2021
Welcome to our weekly wrap. This week we’ve rounded up the latest news and insights, including recent Government updates covering furlough and small business payments, pre-Budget recommendations from the UK’s leading business group, plus, a round up of UK-wide funding and business news.
Sunak urged to extend furlough – plus, Budget recommendations
The government needs to give more financial help to struggling firms ahead of the Budget in March, the CBI business lobby group has said.
In its letter to the chancellor, the UK’s leading business group outlines the support measures needed in the next few weeks to help protect UK companies through the Spring – including an extension of furlough to June.
Tony Danker, the new director-general of the CBI, said progress on the vaccine rollout brings real cause for optimism but, ‘almost a year of disrupted demand and extensive restrictions to company operations is taking its toll. Staff morale has taken a hit. And business resilience has hit a sobering new low.’
‘The government must once again stand shoulder-to-shoulder with businesses to underwrite support for the duration, helping viable enterprises to last the course.’
Ahead of the Budget, the CBI wants the government to:
- Extend furlough beyond April to June, with a commitment to targeted support thereafter to give firms the certainty needed to protect jobs
- Lengthen repayment periods for VAT deferrals until June 2021 at the earliest, and allow firms to defer VAT bills due now for a year
- Extend the business rates holiday for at least another three months to those UK firms forced to close under current restrictions
Additional pre-Budget CBI recommendations include:
- Delivering the Pay As You Grow scheme for Bounce Back Loans including extending capital and interest payment holidays for a further six months.
- Ensuring the Coronavirus Corporate Financing Facility (CCFF) scheme is kept open until the end of June 2021.
- Announcing details of the successor of the Coronavirus Business Interruption Loan Scheme (CBILS).
- Working with Local Authorities to ensure existing discretionary grants are in businesses’ bank accounts by the end of February 2021.
At Budget, CBI recommendations include:
- Using the net-zero transition to drive the UK’s economic recovery
- Delivering comprehensive reform of the business rates system – to support our struggling high-streets, drive essential investment in energy efficiency and level-up business investment across the UK
- Turbo-charging innovation spending by government and business
- Incentivising greater business investment in retraining and upskilling
Government tackles late payments to small firms to protect jobs
An overhaul of the Prompt Payment Code (PPC) to crack down on delayed invoices owed to small businesses was announced by the government this week.
The Department of Business, Energy and Industrial Strategy revealed businesses that have signed up to the PPC will be obligated to pay smaller businesses within 30 days, instead of the previous 60 days – although that deadline will remain for larger companies. The code currently has 2,800 signatures.
The government estimates there are £23.4bn worth of outstanding late invoices.
The move comes as the government seeks to strengthen the powers of the Small Business Commissioner (SBC) to ensure larger companies pay their smaller partners on time.
According to the Federation of Small Businesses (FSB), around 50,000 small firms close every year due to late payments and said the issue has become ‘more prevalent than ever’ as a result of the COVID-19 pandemic.
Philip King, interim small business commissioner, said:
‘Late payment causes real hardship to small businesses. Code signatories of all sizes demonstrate their commitment to ending the culture of late payment and helping to increase business confidence‘
Mike Cherry, national chairman of the FSB, added:
‘Ending our pernicious poor payment culture for good over the coming months will be fundamental to turning our hopes of economic recovery into reality.’
In addition, the new requirement for signatories to pay 95% of invoices from small businesses (those with less than 50 employees) within 30 days will be effective from July 1, 2021.
Small firms get COVID-19 insurance boost
The Supreme Court has backed the Financial Conduct Authority’s (FCA) appeal for small firms to receive payments from coronavirus-related business interruption insurance policies.
Thousands of small firms are now set to receive insurance payouts to cover losses from the first national lockdown.
Eight insurers agreed to take part in the FCA’s test case, resulting in over £1.8bn expected to be paid out.
Sheldon Mills, executive director of consumers and competition at the FCA, said:
‘We will be working with insurers to ensure that they now move quickly to pay claims that the judgment says should be paid, making interim payments wherever possible‘
In the lockdown of last spring, many small businesses made claims through business interruption insurance policies for loss of earnings when they had to close. Many insurers, however, refused to pay, arguing only the most specialist policies had cover for such unprecedented restrictions.
It was agreed that a selection of policy wordings should be tested in court, setting the parameters for what would be considered a valid claim.
The ruling provides guidance for a wider pool of 700 policies, potentially affecting 370,000 small businesses.