Future of speciality retail under challenge by big business
Posted on in Business News , Political News
The Independent Retailers Confederation (IRC), led by ActSmart, has identified that independent retail business owners personally fall through the gap in the Government's Coronavirus Business Support Programme.
The great majority of indie retail business owners pay themselves well below the minimum wage via PAYE and are then wholly dependent upon generating trading profits - after corporation tax upon their small limited companies - from which they might pay themselves a dividend.
These business owners are unable to claim personal income via the government Self-Employment Income Support Scheme, and the Job Retention Scheme would in most cases earn less than £835p.m. although they have to continue working in some format in order to simply keep their businesses alive.
The Government has now incorporated company directors into the furlough guidance, but the limitations are such that they inevitably will fall outside of the scheme.
The IRC penned a letter to the Chancellor, highlighting this issue with clear recommendations to address it in the interests of business continuity for the indie retail sector.
The proposal is supported with clear criteria, supported by IRC member trade organisations.
But, in taking prior soundings for the proposal Government's stance is that "dividends are not covered by the Coronavirus Job Retention Scheme because income from dividends is a return on investment in the company, rather than wages, and is not eligible for support".
For many business owners the return upon investment is their main source of income. Independent retailers make huge investments in their businesses to get them operational, often supported by personal guarantees; they then draw minimal wages, work excessive hours and risk all to generate a living wage via their investment, both personal and financial.
Undermining their negligible personal income at this time is putting the future of the high street as we know it at serious risk. The situation was perilous for many before Coronavirus and with the ongoing situation is has only worsened.
It's almost certain that the level of claims arising via large businesses, including retail multiples has surprised the Government and put a dent in further support for the micro and SME sector.
It has been predicted that over 6m private sector employees could be furloughed earning 80% of basic pay, at a cost of £10bn per month i.e. £30bn up until the end of May when the scheme is due for review and likely extension according to Thisismoney.co.uk.
Sir Philip Green has been reported to be furloughing 14,500 employees, whilst according to Sky News the Arcadia Group is seeking to borrow up to £50m against its distribution centre to see the business through the coronavirus crisis. Whilst the boom in demand for food arising from the crisis has seen Tesco announce a £635m dividend, whilst benefiting from a business rates holiday worth £585m according to the Guardian.
All of this at a time when independent retailers are getting negligible support from the banks. A survey of 300 independent retailers showed that just 1% that had applied for a business interruption loan had been successful so far.
Against this background micro retail business owner financial support is a critical and relatively small requirement, simply to allow them to see their businesses through this challenging period.