Shops, hairdressers, and small bars are currently battling to survive after many lockdown closures.
A ‘tsunami of closures’ is about to hit independent high street businesses, after debt has surged to almost five times the level it was pre-pandemic, as shops, hairdressers, bars, and restaurants struggle to survive.
£23bn worth of debt has been racked up by around 150,000 small businesses, which is up by more than £500m before the outbreak of COVID-19, based on government-backed loans and not including rental debt, according to a report conducted by Bill Grimsey, the former boss of Wickes and Iceland, who has chosen to run a series of investigations into the high street.
Grimsey has commented that at least 33% of small businesses were facing default, which could lead to a knock-on effect for shops on the high street and town centres.
Many businesses have had to take on unsustainable levels of debt, due to months of enforced closures during the lockdowns to control the spread of coronavirus, and “many are teetering on the brink as a result. Urgent support is required to stop a tsunami of closures”, the report found.
Grimsey said: “These businesses are the backbone of local communities who often put local people before money-making – there is a really human side to this.
“People want their town centres and high streets to be places where they want to go for a reason that is unique and an element of that is independent businesses that provide that uniqueness.”
Grimsey has now called on the government to write off Covid debt loans, potentially using about £2bn in funds returned to the state bank accounts by several large retailers, like Tesco, Sainsbury’s, and B&M, who all gave back business rates relief.
“The French government is already working on a policy to save small businesses from being crushed by debt and we need to do the same to save thousands,” said Grimsey.
High street businesses have recently faced many struggles, as trading has been affected by staff and customers getting ill or self-isolating. However, the first repayments on government-backed loans and furlough payments have begun to reduce.
Grimsey has commented that the government should offer small businesses that had been classed as “non-essential” a business-rates holiday to at least April 2022 and give them the option to defer VAT and employment tax payments.
The report also calls for a rejig of funding for improvements on the high street, so it is more “fair and equitable” and less based on projects competing against each other. Hopefully, the change would focus more on the needs of the local community.
“I am critical of the scattergun support process,” Grimsey said.
According to the report, hairdressers, barbers, and beauty salons were among the hardest hit small independent businesses. Collectively, their debts have risen to more than £300m, which is an estimated six times more than before.
Collette Osborne, who manages two salons in Nottingham, has commented that her business had now run up debts of £250,000, despite being debt-free before the pandemic. She had been forced to take on these loans to pay rent, tax, and wages, in order to keep her business afloat during the periods of enforced closures.
“It has been incredibly difficult,” Osborne said.
She said that although lockdown ended on 19th July, business has still been tough and she doesn’t know how she will pay back all her debts,
The salons are also currently being heavily affected by staff and customers having to self-isolate. Osborne said she is facing several demands for tax payments from HMRC, and service charges from the local council.
She believes the situation has been made much worse, however, as they still haven’t received payment on business interruption insurance.
“We are weighted down very heavily and it won’t take much to break you.” she said.
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