UK small businesses want action on staff shortages and business rates

Staff shortages and supply chain disruption have blighted many UK companies since pandemic restrictions ended and the delayed impact of Brexit became apparent.

Three small businesses — in food processing, live events and retail — describe how they have weathered the crisis and give their verdicts on Wednesday’s Budget.

Finedale Foods

Ed Miles would like to be getting Finedale Foods, his high-end food processing company outside Norwich, back up to full speed. Instead, fresh setbacks are hampering his ability to move beyond the pandemic.

“At a time when I should be focused on recovery and rebuilding relationships with staff, customers and suppliers, I am instead focused on the inhibitors of business,” he said. “We are operating in a mist.”

Miles lost 90 per cent of his business supplying parties and events overnight when the government announced the first lockdown in March 2020. He ended the year with turnover of £700,000 compared to £5m in 2019.

His workforce has been cut by two-thirds to 15. He furloughed some employees but was forced to lay off senior staff.

Other employees have returned home to eastern Europe in the wake of Brexit, and hiring new workers with the same skills has been virtually impossible, said Miles. Now, he is not only battling supply chain challenges to source ingredients and packaging, but is struggling to deliver finished products because of the dearth of drivers since freedom of movement between the EU and the UK ended.

Miles praised government efforts to mitigate the initial damage caused by the pandemic and said the emergency loans he was able to take out helped his business consolidate its debts and manage hibernation.

But he was disparaging about later policy. “They were changing direction every five minutes,” he said.

Wednesday’s Budget did little to alleviate the stress on his business, which does not qualify for the one-year cut in business rates offered to the hospitality, retail and leisure sectors — even though he supplies them.

His biggest hope, that the chancellor would act to extend the terms of the Coronavirus Business Interruption Loans from six years to more like 10 or 15, was dashed.

Meanwhile, he felt the inflation forecasts in the Budget speech were “overly optimistic” and that any increases to interest rates that might ensue would penalise companies like his that took on substantial debt to survive the pandemic.

Most of all, however, he felt that the government had underestimated the changes brought about by Brexit and the staffing shortages that resulted. “They are throwing such small solutions to large scale problems. They fail to understand the scale of the issue,” he said.

Motif 8

Lynn and Allan Plant have had to take on some of the physical tasks at her live events business

Lynn Plant did not expect to be packing and unpacking trailers at the age of 66. But after her live events company, Motif 8, lost almost all its £800,000 annual business, and three of five permanent staff, she and her husband Allan have had to take on some of the physical tasks as work has trickled back.

“We tried agencies up and down the country and there are no drivers,” Plant said.

Live events were early casualties of the pandemic. But Plant feels that companies like hers, which in a good year builds and leases out exhibition trailers for about 1,000 events, were overlooked in the government’s first rescue packages. She had to fight for six months to ensure Motif 8 became eligible for the relief on business rates initially granted to leisure and retail businesses, and fears that she will have to do the same again to qualify for the 50 per cent reduction announced by the chancellor on Wednesday.

The sector is being abandoned now before it is fully operational again, she said.

“Without the furlough we wouldn’t have lasted,” she said, adding, however, that it had ended too soon for her.

It has been a torrid time. Last year her landlord evicted the company from the factory in Gloucestershire they had leased for 22 years. To stay afloat she and her husband had to sell their house to plough £100,000 back into the company to refund deposits for cancelled events, and to rent a smaller factory space.

The government’s “chaotic” handling of the pandemic had knocked people’s confidence at public gatherings and slowed the recovery for companies like hers that depend on them, she said.

Her bank has deferred repayment on a £50,000 government-guaranteed bounce back loan, but business rates — a tax on commercial property — are falling due again, and the company is struggling with wages, insurance and rent, while staple events such as agricultural shows have yet to return.

“They have not looked at which areas need continued support. Our business won’t come back until next year,” she said of the Budget. “There is no safety net of cash that says if the pandemic continues these are things we are putting in. It was all industry, transport, roads, and nothing to address the hangover.”

Tool Shop Group

Vin Vara supports reform of business rates © Anna Gordon/FT

The UK capital was a ghost town for much of the pandemic. So while Vin Vara’s Tool Shop hardware stores in central London were allowed to trade during lockdowns as “essential” businesses, footfall was way down and turnover fell 68 per cent in 2020.

The group has muddled through thanks to a lean debt profile, relief on crippling central London business rates, mostly sympathetic landlords who discounted rent, and a craze in DIY and gardening among people cooped up at home for two successive summers.

He would like to see the chancellor introduce wholesale reform to the way business rates are applied and “to level the playing field” for independent high street retailers by increasing taxes on online trade.

It would reduce the misery for tens of thousands of smaller businesses if the annual rent threshold for rebates was raised from £51,000 to £100,000, he said. This would ease the pressure on his shops, and also cut back on a huge bureaucratic backlog for government by eliminating the need to revalue many smaller businesses’ rent.

But the 50 per cent reduction in rates for retail offered on Wednesday and the promise that these would be re-evaluated every three years was a good start. The Tool Shop group would gain £25,000 from the move, he said — savings that would help its recovery.

Vara argued that online retailers such as Amazon, whose vast warehouses are taxed at a far lower rate than premium high street space, should pay more in kind. “Online — they have done nothing on that,” he said. “I know they are looking at it though. We have won one battle. Now lets win the war.”

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