As the FT has noted:
Chancellor Rishi Sunak on Monday unveiled new support for Britain's smallest businesses under which they will be able to borrow up to £50,000, with the government underwriting the entire loan.
The so-called bounce-back loans to be provided by commercial lenders – which will be interest-free for the first year, with the government paying any fees – will help companies currently struggling to access credit, Mr Sunak told MPs.
I think there is only one thing to say. Seven weeks too late. And many weeks after I suggested it.
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Sorry Richard, but this is the last thing the government should be doing. All this amounts to is a invitation to thousands of owners of business which were failed or failing long before coronavirus hit, to avail themselves of up to £50k in free money.
Viable businesses with a future in the post coronavirus landscape can access capital from traditional channels. This scheme is nothing more than an attempt to defer to inevitable wave of business collapses that are coming, many of which were baked in before coronavirus existed
With respect, you clearly have not a clue what you are talking about
That is completely untrue
What is untrue? What specifically do you take issue with?
It’s nonsense because there are real small businesses that we need to keep afloat if jobs are to survive this
My guess is you don’t care about that
I do
Interest free for a year….. and then what ?
Fuck that, I’d say. Unless I was planning to default.
The very point I am making which Richard seems reluctant to acknowledge. The only people this is going to appeal to is those fully intending to wind up the business anyway. I’d even argue it will work to encourage people running businesses of marginal viability (and profit) to load up on debt and dissolve the business.
Then you are not talking to anyone in the small business community
I do
so the small businesses will carry the burden of the loan and the risk that the liability will drag them down, and the government will carry the risk of the loan. The banks can’t lose it seems.
I’m not saying they should but your suggestions of direct funding make so much more sense.
As someone with a small business let me inform those who think….
….
(“The only people this is going to appeal to is those fully intending to wind up the business anyway. I’d even argue it will work to encourage people running businesses of marginal viability (and profit) to load up on debt and dissolve the business)”
My new business started trading on Febuary 7th
We then endured the wettest Febuary in recorded history
Our business is outdoor sport related so the weather plays a big part in how busy we are
Then we had three weeks fairly normal trade in March before the lockdown started
I cannot access the government grant scheme as it is distributed via councils to companies in relation to their council tax
As I rent a clubhouse as a franchise the club pays the council tax and I pay the club a rent
therefore no access to grants
My business has only 6 weeks trading records of which 4 weeks were the wettest in history
There are none, Zero, Nada , “normal channels ” that will loan my business any money at all.
There are an awful lot of people with very strong views who know very little about business at all
Unfortunately a lot of them are in the government and the treasury
If I can get access to enough of a loan to help pay the months of PAYE payments I will still have to pay plus my rent electric and gas bills etc etc
My business may just survive .
Thanks
And good luck
We still don’t know all the specifics of the scheme, but if the loan is strictly tied to a percentage of turnover, you’ll probably be shit out of luck anyway. I’m betting you won’t qualify for a single red cent.
Surely the government won’t handing large amounts of money to businesses with no history of trading?
There are 2.8 million active companies in the UK. A lot of the will surely will not qualify.
On the basis of full disclosure, Richard, I assume you have no business interests (or have friends and relatives who do) which would be seeking support from this scheme? Your unalloyed enthusiasm for it, entirely unbridled by serious questions as to the fairness and probity of the policy, is concerning.
I’ll make the point again, because the MSM seems little interested. There are now millions of people who are either going to become unemployed as a direct result of this crisis, or who will now find themselves remaining unemployed far longer than they ever imagined. There is no help for them, not even a discussion about it.
The author of this blog is gravely mistaken if he truly believes the outcome of this situation is going to be anything other than the collapse of at least 50% of UK businesses. That’s happening, and funneling money to business owners by way of a golden parachute is not acceptable. Real existing capitalism, is dead. It ain’t coming back, and the sooner we accept that, and start talking about what comes next, the better.
Ross
I am not claiming nor as far as I know is any business I have any connection with
And I am wholly aware of the risks of massive business failure – I have written extensively about it here
I am predicting 6 million unemployed
But I want as easy a transition as possible for those that jobs that can be saved
I am certain we will come out of this in a massive recession but with a mixed economy
So I want to keep as much as we can going
I make this comment here, a little ‘off topic’ because it seemed the closest topic I could find here today, to make the point.
Bernard Looney CEO, BP has been interviewed by Bloomberg. BP is not furloughing employees. It is not making redundancies, and it is not claiming anything from the Government aid schemes. As far as I can see the next BP dividend – just declared – is the same as the last declared for the previous quarter. There is a steady nerve for you. They are at the same time making hefty changes for the future to drive down breakeven from $56 pb to $35 pb by next year, and signifcantly changing their financing, capex etc., to fit the new environment. At the same time Looney cheerfully claims he is intent on making BP “agile”. I do not know what that means. I wish it meant BP was going to throw enough resource into tidal energy in the Pentland Firth to transform the renewable equation (small change that wouldn’t register as a rounding error in the BP balance sheet to do that), but I do not expect that will even be considered, although the crossover technology between oil and renewables is not to be dismissed.
This interview is nevertheless noteworthy; perhaps most because although BP has publicly traded shares, and is probably the largest dividend paying constituent of the Footsie, funding pensions and so on, it has never strayed far, in my humble opinion at least, from its roots and its origins; as entirely a creature of British Government and British Government policy, on the grand scale; BP wasn’t British Petroleum (thanks to Burmah Oil, the Admiralty and Anglo-Persian Oil as its back story), for nothing. It is the apotheosis of State Capitalism. I write this because after all this discussion today on your Blog about “markets”, BP perhaps serves as a useful reminder of what British capitalism really looks like.
” At the same time Looney cheerfully claims he is intent on making BP “agile”.”
He’s going to squeeze the workers.
There only have three tricks. Cut wages, cut costs or raise prices.
Loans!? Why loans I ask you?!
Hopeless – and very troubling – a foretaste of the reckoning to come I wager.
I think that an entirely fair question
They are ‘loans’ in name only. No director guarantees, no serious consideration of forward viability. There are going to be 2 effects of this scheme, neither of which achieves the ostensible purpose.
1. Owners of unviable businesses load up on debt and then dissolve the business
2. Owners of small/medium businesses with debts to the large businesses which supply them with inputs, are provided with loan capital with which they will pay those debts.
I suspect the latter is a large part of the rationale behind this scheme. Making sure large businesses (especially those with the ear of a Tory politician) get their invoices paid in full. It’s the policy of a government that doesn’t think anything fundamental has changed, will change, or indeed can change. The prevailing economic order, in its view, is set in amber, forever unmoving and immovable. A rude awakening awaits.
I think the point Richard makes is about delivering something that will help business keep going and that many of them may survive and continue to employ people. There will be some fraudsters in the mix and that is a very sad truth at all times.
I know of a number of small business for whom up to £50k would enable them to continue – whether it is wise or not will be for them to decide. They fully realise that it will have to be repaid and most will think more than twice before going ahead with it.
In criminal law the burden of proof is ‘are you sure’ (used to be ‘beyond reasonable doubt’), in civil law it is weighed as to whether something is ‘more likely than not’ (balance of probabilities). The solutions being proposed fall into the latter category, not perfect but workable.
I’m sure up to 50k would do a lot for most people, not sure why running a financially distressed business makes you any more deserving than anyone else. I mean, can we just take a step back and appreciate the grotesque double standard at work here.
Business has financial trouble and it’s no strings loans, which could be pocketed, and the company wound up in a trice
Business has financial trouble and it’s a furlow scheme to cover payroll.
The individual has financial trouble and…nothing.
The underlying ethos behind every intervention proposed or implemented by way of mitigation of the financial impact of coronavirus, has been predicated upon the belief that the individual, as a sovereign entity, is an unworthy scourge. Only when bound to a enterprise, by way of contractual writ, is it deemed acceptable for it, by way of natural consequence, to benefit for state munificence.
Ross
We’ve heard you
Enough now
I think we all know you think this a scam that every person who can will pull
And some will
But the vast majority won’t
Let’s now agree to differ
Please stop posting the same point repeatedly: that does not help
Richard