Challenges Facing Small Enterprises in 2020

The current state of the world has created massive challenges for small enterprises everywhere. This is
particularly true for those in the retail sector, where physical distancing and other “new normal” guidelines have
upended the most common retail business models. Because of the lockdown in the UK, a report by The Guardian
indicates that nearly two-fifths of British retailers
 have completely closed down. This is a direct result of the
current steep and massive decline in consumer spending – the biggest decline since the financial crisis of 2008.
Retailers selling footwear, clothing, carpets, furniture, and recreational goods were hit much harder compared to
those selling food and drinks. Furthermore, in a poll involving 70 retailers conducted three weeks after the
enforced lockdowns, 71% reported that activity had been down at least a year earlier, while only 16% reported an
increase in activity.

In short, perhaps the biggest pandemic-related challenge to every small enterprise in the UK is the sheer
economic uncertainty of the current situation. This uncertainty is reflected in the economic calendar on FXCM,
which shows that the UK retail price index has been volatile during the past month. In economic terms, high
volatility is not only a direct and major symptom of an on-going economic crises, but a potential indicator of a
future collapse or other imminent crises on the horizon.

Although volatility may also be an indicator of potential massive growth, current private and public sector
projections on the British economy say otherwise. Sir Charles Bean of the Office of Budget Responsibility has
remarked
 that a quarter to a third decline in economic activity is “not implausible” for as long as the lockdown is
being enforced. He added that a three-month lockdown could result in a 6% to 8% decline in the UK’s annual
GDP. Meanwhile, forecasts by Natwest Markets, Goldman Sachs, and Capital Economics predict declines of
6.6%, 7.5%, and 12% respectively in the UK’s GDP by the end of the year.

In response to this dire situation, the HM Revenue and Customs (HMRC) has created a helpline for businesses
concerned about the challenge of taxation amid pandemic uncertainty. According to the HMRC, the government
is open to discussing different options such as suspending debt collection proceedings, identifying an agreeable
instalment payment arrangement, and cancelling penalties caused by administrative/logistical difficulties with
either contacting or paying taxes. Such arrangements could significantly ease the economic burden particularly
for small businesses currently struggling to stay afloat in deep waters.

Another promising development is the recent formation of the Business Action Council (BAC), a coalition of
different business organisations responding to the current health situation. Aimed at helping over 500,000
businesses across every sector in the UK with the challenge of bouncing back, the BAC is tasked with
developing well-evidenced policy proposals to provide the government with the right information and perspective
to help these businesses. “E2E are pleased to be working actively with The Business Action Council to
collectively provide a crucial link between SMEs and our government during this time of crisis and unity. We are
determined to ensure our economy can emerge with a foundation that allows it to be vibrant and innovative, so
supporting our national recovery. My sub-committee members and I welcome the opportunity to have
constructive conversations with the Prime Minister’s team on the employee retention support packages. Small
and medium sized businesses are vital for the success of our economy whether as employers, through the
provision of goods and services or being the major enterprises of the future.” explains Shalini Khemka, CEO of
E2E – one of BAC’s founding organisations.

It remains to be seen whether or not the UK – nor any other nation’s economy – will be able to recover.
Hopefully, with aid from the largest business organisations as well as the government, small business owners will
have a much greater chance of making it through this challenging year and emerging on the other side.

 

Specially written for E2E by Blanca Juniya

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