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One Million Businesses Could Go Bust in One Month. That Includes Restaurants

The package of rescue loans and grants set out by chancellor Rishi Sunak to alleviate the impact of COVID-19 isn’t going to come quick enough

Brick Lane Market Affected By Coronavirus In London photo by Mike Kemp/In PIctures via Getty Images

The impact of the novel coronavirus outbreak will see one fifth of small and medium-sized businesses in the U.K. run out of money within four weeks, with many either not qualifying for government grants or facing practical difficulties in accessing business interruption loans.

BBC News reports that new research from a body that represents accountants points to the potential closure of between 800,000 and one million businesses across the country in the next month, as the government’s coronavirus policy of “stay at home” has closed the market and imposed temporary closures across multiple industries, including the restaurant sector. The “small and medium” descriptor refers to rateable value, a tax based on property valuation that here spans £15,000 – £51,000 and applies to restaurants and all other businesses eligible for certain grants.

Those businesses, which are unable to trade or are trading at a significantly reduced capacity — like restaurant delivery — are now attempting to access the cash they need to keep themselves alive, but it’s not happening at the speed required.

Banks say they are following government rules which say that businesses must first try and access loans the “normal” way, before they are eligible to access funds from the new Business Interruption Loan Scheme, launched a fortnight ago by chancellor Rishi Sunak. Loans, of a value of up to £5 million, which he said were being underwritten by the government were part of a package worth £330 billion. “Normal” means borrowing against personal assets — like business property, or their own houses — which puts owners at significant personal risk. If they can take that risk, they are reporting wait times of a month for the money actually arriving, which could be the difference between mothballing successfully and having to pull the plug.

What’s more, many bank branches, which Sunak indicated business owners could walk into to request these new loans, are now closed. With unprecedented demand across sectors, phone banking services are overstretched, with those calling facing long waits to speak to operators: These are serious practical challenges facing businesses which urgently need cash; without it, they will be forced to shut down. At the time of the announcement, Sunak said: “Any good business in financial difficulty who needs access to cash to pay their rent, the salaries of their employees, pay suppliers, or purchase stock, will be able to access a government-backed loan, on attractive terms.”

“The government will stand behind business small and large,” he said, adding that loans were designed “to get businesses through [the crisis].” Currently, they’re not going to work as designed.

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