Tighten your belts the road ahead may be bumpy.

Amid the news of the continued spread of the coronavirus in the UK, this week saw an unprecedented range of intervention in the economy by the Government, HM Revenue and Customs and the Bank of England.

First the Bank of England cut interest rates by 0.5%, the first emergency cut since 2008 with Mark Carney commenting that “… the UK [economy] could shrink in the coming months … the direction is clear, though the orders of magnitude are still to be determined.” The bank also announced details of a £100bn scheme to help households and businesses. The simply named “Term Funding scheme with additional incentives for small and medium-sized Enterprises” or “TFSME” for short aims to ensure that the cut in rate benefits businesses. It works by incentivising banks to lend to businesses by allowing them to access funds at low rates of interest through the scheme. Richard Hallsworth (Director at Nicholsons) commented “There will still be the usual credit underwriting process to go through and therefore it’s vital that there is a well thought through and clear reason for the funding request but like the schemes that were announced after the financial crisis in 2008 this is positive news for SME’s facing cash flow gaps.”

This emergency intervention was followed by a series of measures from new Chancellor, Rishi Sunak, designed to cushion the impact on the economy. Measures included a business rates relief scheme, sick pay support, devolved local authority hardship fund, temporary loan scheme for businesses hit by the virus, increasing of the employee allowance to £4,000 and a £3,000 cash giveaway for small businesses that pay no rates. Of the business rates holiday Richard said “Business rates are a hidden tax for many small businesses and this rates holiday announced yesterday will certainly help those struggling because of the downturn in the economy whilst the cash grant of £3,000 for those that don’t pay rates will provide an instant boost.”

Finally, we heard from HM Revenue & Customs that they are ready to help with thousands of extra officers waiting to help set up time to pay agreements. A new helpline with “Up to 2,000 experienced call handlers is available to support businesses and individuals when needed.” According to the .gov website.

Richard said.  “All of this support is the clearest indication yet that the effects of Coronavirus might be with us for many months after the pandemic comes under control.”

Funding specialist at Nicholsons Stephanie Smith said “Whilst these announcements are positive, I’m hearing news from the funding and insolvency sectors that concerns me. Corporate insolvency numbers are up, debtor days are stretching, and some lenders are tightening credit policy making it more difficult for businesses in certain sectors such as travel and transport, supply chain and freight and food and hospitality to access cash.”

It’s clear that we are going to go through a period of economic turbulence and as business owners it’s vital that we take action to protect our businesses. So, we caught up with our team of business advisors to get some tips to help.

  1. Understand your cash position. What cash have you got now and how much do you think you will have 30 days, 60 days and 90 days?
  2. Think about the impact a reduction in activity could have on your business. This could be because of a drop in turnover, lack of products or raw materials or because employees are away from the business.
  3. Review your debtors, stock and creditors to see what cash you can squeeze from them. This is a free source of cash and needs to be working for you.
  4. Identify whether you’ve got a gap in cash. Do your cash requirements exceed cash availability and when?
  5. Consider what source of funds you might be able to access and plan whether there is sufficient cash available to plug the gap.

Richard concluded by saying “The interventions announced are significant and should make us (a) pause and consider what impact coronavirus could have on our businesses and (b) act now by planning, because the signs are there is going to be a shock of some kind.”

If you would like help with any of the points outlined above or are already feeling the pressure of a tightening cash flow and would like to discuss it with one of our Business Advisors, please call us on 01522 815100.