Independent retailers are fighting against the odds according to review
The main finding is that the collective debt of independent retailers – hairdressers, nail bars and smaller shops – has jumped five times in just over a year from £500 million to £2.3 billion.
Amongst the report’s recommendations is the suggestion that the government should write off a proportion of the debt as without any other help or assistance the report predicts there will be a UK-wide wave of store closures and job losses occurring in the Autumn.
Bill Grimsey said: “Our high street independents have experienced a new-found appreciation during lockdown but they’ve also been forced to take on government backed loans, which they would not have normally been able to get because their balance sheets wouldn’t allow it.
“Now they’re struggling to manage a mountain of debt and need help.
“Many are teetering on the brink as a result and urgent support is required to stop a tsunami of closures coming.
“These businesses are the backbone of local communities who often put local people before making money – 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.
He added: “Britain is at a crossroads and the pandemic has brought about sweeping changes that will make a decisive break with a traditional high street model.
“But we can’t build our way out of trouble. To unlock the potential of our high streets, we need to focus on people, partnerships and communities as well.
“That means protecting small businesses. It means supporting a new breed of digitally savvy entrepreneurs and making high streets a testbed for new thinking and it means promoting high standards and regulating key sectors such as hair and beauty.
“Britain needs a social recovery to lock in an economic one and our high streets should lead by example.”
The report found that smaller independent hairdressers, barbers and beauty salons were among the hardest hit with collective debts equal to £300 million – approximately six times more than before the pandemic.
The authors reviewed the published accounts of every UK independent business across the retail, services and hospitality sectors with total assets of £250,000 or less.
They estimated that at least a third of the businesses that qualified as small independents were facing defaults.
They projected that 49,000 of the 145,941 independent businesses in the study were at risk of default from not being able to pay off their bounce back loan scheme borrowing.
Bill Grimsey said: “The French government is already working on a debt write-off policy to save their small businesses from being crushed by debt and we need to do the same to save thousands.”
This proposed debt write-off solution would be funded by the £2 billion that large retailers such as Tesco, Sainsbury’s and B&M had returned to the government when they handed back their business rates relief.
With the first repayments for bounce back loans and CBILS beginning last month and furlough payments also beginning to reduce, trading is also being hampered by increasing numbers of Covid-19 cases and self isolation for customers and staff alike.
Other measures of support suggested by the report include giving small businesses classed as “non-essential” a business rates holiday until April 2022 and to allow them to further defer their VAT, PAYE and national insurance contributions in order to help their survival chances.
Independent retailers, shops and hospitality businesses are indicative of the rest of the economy.
Individually they might not generate as much turnover or income as bigger businesses but collectively they combine to form a major piece of the UK’s economic lifeblood as well as being anchors within their own community.
If they’re in distress then the damage affects not only the business owners and directors but also their local area and their sector.
The warnings from experts like Bill Grimsey not only match our own findings from earlier this year about the threat that bounce back loan debt defaults pose but also underline how important it is for businesses to act if they’re under pressure.
There is a narrowing window of opportunity for companies to act before the end of September when various changes occur that will make the environment from October onwards far trickier to make the essential and necessary changes they need to give themselves the best chance of revival and renewal.
Get in touch with us to arrange a free initial consultation with an expert advisor who will be able to let you know which options are available to you – right now.