finnCap senior partner tells House of Lords that more measures are needed to support UK SMEs
Lord Howard Leigh of Hurley, senior partner at Cavendish Corporate Finance & deputy executive chairman at finnCap Group plc, has told the House of Lords that more must be done to support UK SMEs through the period of uncertainty caused by the coronavirus pandemic.
Speaking in the House of Lords Budget debate on Wednesday 18th March, Lord Leigh said that whilst the support offered by the Government to businesses in terms of sick pay, the business interruption loan scheme and business rate relief was commendable, the Chancellor should consider going further, including relaxing insolvency laws, creating emergency direct support through the tax system and re-assessing recent proposed changes to Entrepreneurs Relief. Such moves, argued Lord Leigh, would provide more direct support to businesses which need it.
Lord Leigh also reminded Ministers that business’ access to working capital was vital. Although mechanisms had been put in place to try to ensure this, he noted, public and commercial lenders may not have the tools to combine quickly enough to grant the much-needed access to liquidity. Businesses in the travel, leisure, retail and gambling sectors could be particularly affected and deemed non-viable, Lord Leigh warned.
Instead, in order to offer more targeted support, Lord Leigh is calling for the Government to apply a test to businesses linked to a fall in their income, in order to divide companies into those which are at serious risk and those which are not. Under such a scheme, if a company met the test then they and their employees would be eligible for an immediate PAYE holiday up to the top of the basic rate threshold for the duration of the coronavirus crisis. In turn, these companies would not qualify for the Government’s subsidised loan scheme, meaning that such loans could be focused on the businesses which were not at immediate risk but which nevertheless needed some additional support.
In addition, Lord Leigh has highlighted how current insolvency laws are not helpful for such a unique crisis. Directors of Limited companies who are mindful of their responsibilities to creditors but conscious of avoiding personal liability are, he argued, almost pushed to call in the administrators. He went on to say that a relaxation of the insolvency laws for the next few months, much like the approach Germany is taking, was required urgently. Lord Leigh also went on to say that the only way through this crisis is a creditors moratorium.
Finally, Lord Leigh noted that the announcement in the Budget to reduce the lifetime limit for Entrepreneurs Relief from £10m to £1m would deter entrepreneurs from investing and reinvesting in UK start-ups. Notwithstanding the potential flee of talent from the UK, such a change to the relief wold deprive HMRC of not only more in capital gains but also future corporation and payroll taxes, he concluded.
