With April payroll approaching, London Chamber of Commerce and Industry is warning that unless banks up the pace of lending, then some of the capital’s SMEs will soon be out of business.
The capital’s oldest business group also warns that the Government need to provide rapid clarity regarding furlough funding beyond May 31, in order to avoid unnecessary redundancy notices being issued throughout the economy.
Writing to its membership today (Wednesday April 15), LCCI CEO Richard Burge said:
April 24 is the last Friday in the month. I fear that for many of you, this will be the moment of truth. The day on which you will have to decide if you still have a viable business. This will not be a matter of book-keeping, some bizarre accounting convolution. It will simply be a question of adding up the money you need to pay to your staff, your bills to suppliers, the tax you have collected from PAYE, the rent on buildings and the lease on equipment. If you do not have access to enough cash to pay all that, then you will have to stop. You will go home that night walking away from a ruined company, years of work lost, staff unpaid, and credit rating dropping through the floor. And you still will not have the funds to pay your own mortgage, or your own bills.
It is that serious.
And why is this? The government has created a loan scheme that is meant to reach us all but has to be channelled through the banks. As I write, only just above 6000 have been made. This time last week it was 2500. The government has provided a generous furlough scheme, but you have to provide the cash flow until the portal opens for you to claim it. The only hope is that your bank’s willingness to extend credit facilities on reasonable terms to enable you to continue business.
You can only access the government loan scheme through a bank. But many banks seem to have lost touch with the real economy of this country. Some are managing small business accounts through algorithm rather than their on-the-ground professional and expert personnel. Attached to this note is our assessment of what the major banks are providing. It is a mixed bag. Many are not declaring what their interest rates will be, most are not clear on what they are offering in terms of bridging finance, and many are simply unable to accept new business – so in truth you are reliant on your current bank.
So over the next 10 days I urge all banks to do the following:
- Up the pace of CBILS lending and allocate all available resources to it.
- Publish clearly the interest rates they will charge on CBIL loans beyond the first year.
- Declare the threshold for security on those loans.
- Guarantee all existing customers zero-interest and zero-fee overdrafts for six months based on the average monthly cost base of their business.
- Say when they will be able to accept CBIL business from non-existing customers.
I’ve also been liaising with Ministers regarding the furlough scheme. I’m assured that the portal for the furlough payment scheme will be open on April 20 and that payments will be approved within three to four days.
Let’s face it, that portal will be rammed, so get prepared now. We do not have the format but the this link tell you exactly what information you have to submit - https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme#claim. Please assemble this information now so you can enter it on-line quickly.
My blunt advice, however, is do not assume you will receive the furlough money by the end of the month. Try to make provision to pay your bills before it arrives.
We will also be seeking urgent clarity from the Government about the furlough scheme beyond May 31. The temporary scheme is in place for three months (starting from March 1) – meaning there’s no certainty onwards from May 31.
Redundancy notice for 100+ people requires 45 days consultation, and below is 30 days’ notice. Clearly this is a fast-paced crisis and rightly the Government are listening to expert advice that will impact how long the shutdown of the economy is appropriate for in order to save lives. But unless the Government provide rapid clarity about the length of the furlough programme then I fear many businesses will feel they have to turn to redundancy consultation sooner rather than later.
These remain unprecedented times. I’m sure you join me in feeling that you need as much support as possible from your bank and government.
Remember that the homepage of our website remains a useful reference point for business information, and that we are also running a regular series of business resilience webinars, which hopefully provide an outlet for your questions and concerns.
My best wishes to you all.
London Chamber of Commerce and Industry.