The debt of independent businesses has increased five times during the pandemic which could lead to a fresh wave of store closures, a new Grimsey Review report has warned.
The report, which focused on independent retailers, hospitality providers and service businesses, has found the combined debt of these three sectors has risen from £0.5 billion at the start of the pandemic to £2.5bn in March 2021.
“Most have been forced to take on unsustainable levels of debt and many are teetering on the brink as a result. Urgent support is required to stop a tsunami of closures,” the report noted.
Noting that the small businesses have had a raw deal during the pandemic, the review has called for a ‘comprehensive forgiveness scheme’ for dealing with the anticipated loan defaults so that the uncontrolled collapse of independent businesses can be avoided and help viable but over-indebted companies survive.
“Given there are almost 150,000 small independent businesses out there that face five times the debt they had going into the pandemic, there is going to be a significant number of business failures and a large part of that debt will default,” Bill Grimsey, former boss of Wickes and Iceland, said.
“These people need urgent help and understanding and should be seen as a critically important cohort of independent businesses at the heart of communities up and down the country.”
The review has also called for an extension of the business rates holiday for all non-essential retailers, hospitality and service providers until April 2022, and a review in January next year to decide on further extension.
“Business rates remains a broken and outdated taxation model, which urgently needs an overhaul, as it’s holding high streets back,” the review noted.
“If the G7 nations can come together to make a global agreement on the taxation of multinationals then surely our government can get on with reforming business rates. The planned review for this autumn must be bold and decisive. Government can no longer afford to kick this problem down the road.”
Terming the tax system as “fundamentally unfair” to small businesses, the review urged the HMRC to play a constructive role in business rescues aimed at helping independent businesses owners wean themselves off the government’s coronavirus support schemes, such as VAT/PAYE deferrals, the bans on rent arrears enforcement and on the issuance of Winding Up Petitions.