‘Tsunami of closures’ threaten UK high streets as debt grows fivefold | Small business

Independent high street businesses could face a “tsunami of closures” after their debt climbed to almost five times the level it was before the Covid-19 pandemic, as shops, hairdressers, bars and restaurants battle to survive.

About 150,000 small businesses have racked up £2.3bn in debt, up from £500m before the pandemic, based on government-backed loans and not including rent debt, according to a report from Bill Grimsey, the former boss of Wickes and Iceland, who has backed a series of investigations into the state of the high street.

Grimsey said he believed at least a third of small businesses were facing default, with a knock-on effect for high streets and town centres around the country.

Most have been forced to take on unsustainable levels of debt after months of enforced closures during the lockdowns to control the spread of Covid and “many are teetering on the brink as a result. Urgent support is required to stop a tsunami of closures”, the report found.

Grimsey said: “These businesses are the backbone of local communities who often put local people before money-making – there is a really human side to this.

“People want their town centres and high streets to be places where they want to go for a reason that is unique and an element of that is independent businesses that provide that uniqueness.”

Grimsey called on the government to write off loans, potentially using about £2bn in funds returned to state coffers by large retailers including Tesco, Sainsbury’s and B&M, which handed back business rates relief.

“The French government is already working on a policy to save small businesses from being crushed by debt and we need to do the same to save thousands,” said Grimsey.

Despite the difficulties faced by high street businesses, with trading hit by staff and customers getting ill or self-isolating after coming into contact with someone with Covid, the first repayments on government-backed loans began last month just as furlough payments also began to reduce.

Grimsey said the government should give small businesses that had been classed as “non-essential” a business-rates holiday until April next year and allow them to defer VAT and employment tax payments in order to survive.

The report also called for a rejig of funding for high street improvements so it was “fair and equitable” and less based on projects competing against each other and more on the needs of the local community.

“I am critical of the scattergun support process,” Grimsey said.

The report found that small independent hairdressers, barbers and beauty salons were among the hardest hit with their debts collectively rising to £300m, an estimated six times more thanbefore the pandemic.

‘It won’t take much to break you’

Collette Osborne, who runs two Hairven salons in Nottingham, said her business now had debts of £250,000, having been virtually debt-free before the pandemic. She said she had been forced to take on loans to pay rent, tax and wages to keep her business afloat during eight months of enforced closures over the past year.

“It has been incredibly difficult,” Osborne said.

She said that despite lockdown easing and then ending on 19 July, business was still tough and she was unsure how she would repay her debts.

Four of her staff are self-isolating and in one salon almost half the booked-in customers cancelled on one day after getting ill or having to isolate. Osborne said she was facing constant demands for tax payments from HMRC as well as service charges from the local council.

She said the situation had been made far worse as her company had not yet received payment on business interruption insurance.

“We are weighted down very heavily and it won’t take much to break you,” she said.

“This week trading is down 50%,” she said. “If anything, 19 July is going to make things more difficult.”

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