Small businesses urgently call for more Covid support

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A woman wearing a mask walks past an empty shop which is to let on 15 March 2021 in Burslem, EnglandImage source, Getty Images

Small firms need more help to bridge an 18-day gap as Covid limits continue but financial support packages wind down, the Federation of Small Business says.

Restrictions were set to be lifted in England on 21 June but this was delayed for four weeks until 19 July.

However, a number of measures aimed at helping firms, such as a business rates exemption and deferred VAT payments, will end on 1 July.

A government spokeswoman said "substantial" support would remain.

The FSB, which represents small firms, is concerned that there will be a gap in financial provisioning that will put more pressure on businesses that are already struggling.

Many firms, especially in the night-time hospitality sector, had budgeted to be able to trade from 21 June.

However, the delay in easing coronavirus restrictions means firms are continuing to struggle financially, the FSB says.

While the government has committed to continuing the furlough scheme, there will be changes from the start of July that will require increased payments from businesses.

From 1 July, business rate exemptions for retailers and hospitality firms will also end.

At the same time, the amount of wage costs employers need to contribute for furloughed staff through national insurance and pension will rise from 5% to 14%.

Firms will also have to start paying deferred VAT bills, while repayments on more than £45bn in emergency bounce-back loans will soon be due.

Cash reserves

FSB national chairman Mike Cherry told the BBC that some of the UK's most fragile businesses had "clung on" through the pandemic, but now have no cash reserves remaining.

"With 'freedom day' delayed and business support now peeling back, we are worried for those who suddenly face new costs, but are unable to raise revenue to pay for them. Some may now cease trading and let staff go," he said.

"Business support should be extended such as full furlough and full business rates relief."

A spokeswoman for the government said that the furlough scheme, introduced at the start of the first nationwide lockdown, was still in place until September and "is amongst the most generous schemes in the world", providing £65bn of support and protecting 11.5 million jobs.

"The government will continue pay 70% of workers' wages over July, with businesses asked to cover just 10%," she added,

"They can also continue to access additional support, including restart grants worth up to £18,000 per business, and business rates relief and a cut to VAT - both in place until March 2022."