What directors need to know

100 years ago, TS Elliot began his epic poem The Waste Land with a phrase that has been pored over and considered by scholars and critics for nearly as long. 

“April is the cruellest month”. 

Sadly, for many small and medium sized businesses, this centenary is one that could see the famous poet’s words ringing truer than ever even if they’ve never read a word of it.

The Institute of Directors (IoD) conducts a monthly economic confidence survey amongst their membership and this has gone from -4 in February to -34 in March, the lowest level it has reached since October 2020. 

Roger Barker, policy chief at the IoD said “It’s a watershed moment for the economy and the government needs to step in.”

What does he mean by a ‘watershed’ moment?

As we’ve previously written, VAT rises for the hospitality industry from 12.5% to 20%; restrictions on winding up petitions were lifted at the start of the month meaning that creditors owed £750 or more can begin to issue statutory demands once more and pursue liquidation as a final solution.

The National Living Wage increases by 6.6% to £9.50 an hour and employers will also have to pay higher national insurance contributions of 1.25 points this month too.

Additionally, commercial tenants that have fallen behind on rent will face the prospect of potential eviction as a government moratorium on rent debt is lifted after two years (whilst there is arbitration available, this could see their expenses rising even more). 

Businesses are also repaying their bounce back loans if they took them out during the pandemic – despite many not returning to full operational capacity.

Hospitality and retail businesses began a 15-month holiday from business rates during Covid that started to taper in June 2021 and from April they will only be able to claim 50% of their business rates up to a cap of £110,000 per business – not per site. 

Dominic Curran, property policy adviser at the British Retail Consortium, said: “The new level of relief is great if you’re an independent business with one shop. If you’re a bigger business it’s very, very low and virtually meaningless.”

A recent flare up of Covid cases is keeping footfall low relative to pre-pandemic levels.

As we’ve already written, rising energy bills are going to be a severe handicap for several businesses this year. 

Joint work from the four major hospitality trade bodies indicates that while energy bills for their members will increase on average by 95% and by as much as 200% for an unlucky 10% of them. 

The Federation of Small Businesses (FSB) shows that London-based businesses alone would typically be looking at a £10,000 increase in their utility bills this year. 

FSB Chair Martin McTague said: “The soaring bills will end for many of the quarter of a million firms that say they’re on the brink of collapse. 

“Whether it’s a care home bracing for an even higher tax bill because of the so-called health and social care levy, the electrician facing higher and higher charges to fill up to complete urgent jobs or the restaurant which, after two years of trading restrictions, is trying to rebound as energy and food prices rocket, small firms right across the piece are in urgent need of support.”

Kate Nicholls, chief executive of UKHospitality described the VAT rise, tapering of business rates relief, employment costs and the end of both insolvency and rent arrears protections as a “quintuple cliff edge” for her sector and others. 

“Businesses have a wall of costs and protection being removed at the same time that customers are also feeling the pinch and confidence is fragile. 

“Businesses’ biggest cost is labour. Pubs, restaurants and shop managers were already fighting for staff thanks to an exodus from those sectors worst hit by the pandemic and they now face even steeper wage inflation along with the increase in the national living wage. 

“We’ve seen businesses already capping capacity, reducing hours and closing on certain days of the week to constrain demand and preserve staff.”

“One must be so careful these days” – “The Waste Land”, T S Elliott

Especially when there are so many financial pitfalls and potholes for even the most well run and viable business to navigate past this month. 

Unfortunately, many companies are being asked to do this while spinning several plates so it’s inevitable that some might fall and cause damage that will be hard to repair. 

This is where we can help. 

We offer a free, virtual consultation to any business owner or director on what they can do to protect and strengthen their business before they find themselves in a cash crunch that’s no fault of their own. 

Working closely with them, we can identify what the main threats and problematic areas are and outline available solutions and options to overcome them.   If they seek advice at an early enough stage then this can head off problems before they even occur. 

We can help businesses struggling to juggle creditors’ demands and obligations too but generally the earlier in the process they can look for help, the better for them in terms of time to implement solutions and the range of solutions available to them too. 

Pianist Rekesh Chauhaun, who will perform a concert at a festival in celebration of the poem later this year said: “The Waste Land is dark, but there’s a lot about renewal and regeneration too.”

We couldn’t put our hopes and aims for businesses better ourselves.