Chancellor Rishi Sunak will order banks to hand over loans to struggling firms as ‘one million businesses teeter on the brink of collapse’ because government backed schemes are not being passed on and companies ‘furlough half their staff’
- New survey of business suggests there is a massive take up of furlough scheme
- Some 44 per cent said they expect to furlough 50% plus of workers in next week
- Comes amid growing criticism of the Treasury’s coronavirus bailout package
- Chancellor Rishi Sunak due to overhaul measures tomorrow to help more firms
Rishi Sunak is preparing to overhaul his bailout for business and order banks to give firms the financial support they need after it emerged almost half expect to furlough at least 50 per cent of workers in the next week.
The Chancellor is widely expected tomorrow to announce a fresh wave of action to help companies hit by coronavirus after research published by the BBC suggested up to a million could be forced to shut.
Mr Sunak is due to make it easier for companies to get hold of cash through the government’s Coronavirus Business Interruption Loan Scheme.
There have been widespread reports of businesses either being refused help by banks or of being offered money but with interest rates as high as 30 per cent.
Meanwhile, a British Chambers of Commerce survey of 600 firms found 44 per cent of firms are likely to put more than half of their workers on furlough, with the government then paying their wages.
A majority of firms – 62 per cent – only have up to three months’ cash in reserve and almost one in five have less than a month in their rainy day funds as they struggle with plummeting revenues.
Chancellor Rishi Sunak announced last month the government will pay 80 per cent of the wages of furloughed workers, up to a maximum of £2,500
The furlough scheme announced by Mr Sunak last month will see the government cover 80 per cent of the wages of furloughed workers, up to a maximum of £2,500 per month.
The measure was designed to ensure the tie between employer and employee is maintained during the lockdown so that businesses can swiftly get back up and running when coronavirus restrictions are lifted.
But the BCC’s survey suggests there is a massive take up of the scheme which could cause the cost to soar.
The Treasury has said the bill for furlough is hard to predict because it depends entirely on how many firms ask for help but the latest numbers indicate the price tag could end up being higher than previously expected.
A third of firms polled said they were planning to furlough between three-quarters or all their staff in the next week, while just one in four said they would not use the scheme in the immediate future.
Two out of three firms said they were embracing remote working, with half using video conferencing. Almost a fifth of those surveyed said they had closed their business temporarily.
Dr Adam Marshall, the director general of the BCC, urged Mr Sunak to speed up the delivery of financial help for British businesses.
He said: ‘The coronavirus pandemic has taken a heavy toll on business and economic activity across the UK.
‘While businesses have welcomed the unprecedented size and scope of the government support packages, our findings highlight the urgent need for that support to reach businesses on the ground as soon as possible.
‘The majority of firms cannot wait weeks or months for help to arrive.’
On the issue of cash flow, 18 per cent of firms surveyed reported less than a month’s worth of cash in reserve.
Some 44 per cent reported one to three months’ worth of cash in reserve and only six per cent reported having a cushion of more than 12 months.
Alok Sharma, pictured yesterday in 10 Downing Street, said it would be ‘completely unacceptable’ for banks not to pass on the benefits of a coronavirus business bailout scheme
Meanwhile, the Office for National Statistics today published a new fortnightly Business Impact of Covid-19 survey for the period between March 9-22.
It showed that of the more than 3,600 businesses which responded, some 45 per cent reported that turnover was ‘lower than expected’.
Just over a quarter – 27 per cent – said they were reducing staff levels in the short term and almost half said they had encouraged employees to work from home.
The latest statistics come amid a rising backlash over the implementation of Mr Sunak’s coronavirus business interruption scheme.
The Chancellor said firms would be able to walk into bank branches and apply for the loans on ‘attractive terms’.
But there have been widespread reports of banks refusing applications or offering cash but with exorbitant interest rates.
Business Secretary Alok Sharma yesterday warned banks it would be ‘completely unacceptable’ for them to ‘unfairly refuse’ funds for ‘good businesses in financial difficulty’.