Yahoo Finance Coronavirus: Businesses plead for urgent support as two thirds furlough staff
Companies urgently need promised state support to start reaching their bank accounts within weeks in order to avert a potentially devastating cash crunch, a leading business group has said.
The British Chamber of Commerce (BCC) said on Wednesday that its members were struggling to access the financial support promised by the UK government last month, setting many up for a potentially devastating cash crunch at the end of the month.
66% of small and medium-sized businesses surveyed by the BCC over the last week have furloughed staff, banking on government cash to pay their wages. If money does not reach many soon they could be forced to lay off staff or shut up shop for good.
“Businesses on the frontline need cash to start flowing from support schemes fast,” said Dr Adam Marshall, the director general of the BCC.
“With April’s payday coming up, we are fast approaching a crunch point, and both the furlough scheme and CBILS facilities need to be accelerated.”
READ MORE: Economy could crash 35% due to coronavirus lockdown
Chancellor Rishi Sunak last month promised £330bn ($415bn)-worth of state-backed loans to support businesses under the coronavirus business interruption loan (CBILs) scheme. 130,000 businesses applied for the loans within a week.
However, the BCC’s survey of 700 members found only 2% had been able to secure a CBIL. 9% had been rejected.
As of last Wednesday, only 2,500 businesses had been granted loans totalling just £453m, according to industry group UK Finance.
Chancellor Rishi Sunak said on Tuesday that there had been “enormous improvement from where we were” over the last few weeks and the “changes that we’ve made I think are making a difference.” He said banking staff had been working over the Easter weekend to get loans approved.
The government has also promised to pay 80% of wages for employees who have been furloughed, up to a maximum of £2,500 per month.
66% of companies have already furloughed at least some staff, the BCC’s survey found, with 31% furloughing between 75% and 100% of employees. Many businesses are facing a total collapse in revenue due to the COVID-19 lockdown and are banking on government support to pay staff wages through the crisis.
READ MORE: 'The Great Lockdown' to be worst recession since Great Depression
However, the Treasury said last week that the employee retention support scheme will only be up and running by 20 April. It means many businesses could face a payday cash crunch at the end of the month.
“While we’ve seen a high number of firms furloughing staff in anticipation of the Job Retention Scheme coming online, it is still unclear whether they will start receiving funds before their payroll date, which could exacerbate the cash crisis many businesses are facing,” Dr Marshall said.
The BCC’s survey found two thirds of companies have only three months or less of cash to survive on.
“It is essential that the Job Retention Scheme makes payments to businesses as soon as possible,” Dr Marshall said. “Any delay could mean more livelihoods under threat, more business failures, and more hardship in our communities.”
The Chancellor said on Tuesday that businesses would receive cash within “days” once the furlough scheme is up and running.
The government “had to build a brand new system from scratch” to handle the furlough scheme, Sunak said: “That is what is dictating the timing.”
“The team have been working night and day since the announcement to get this up and running,” the Chancellor said during the daily Downing Street press briefing.
The government’s economic support package was initially welcomed by business groups but has since been criticised for the slow speed at which it is reaching businesses.
READ MORE: UK unemployment 'could more than double' to 27-year high
The state-owned British Business Bank is running the CBIL scheme, which has come in for particular criticism. On Saturday the British Business Bank announced that four new lenders had been approved to offer CBILs.
“These new lenders will be able to deploy vital funding and get additional finance flowing to smaller businesses across the UK as quickly as possible,” Keith Morgan, British Business Bank chief executive, said in a statement sent to the press.
Many more alternative finance providers are waiting for approval under the scheme.
