By Seema Malhotra
Labour MP for Feltham
and Heston, and shadow employment minister
SMALL businesses are the backbone of our economy. They have been hit hard by the lockdown and the slow steps back to trading.
SMEs [small and medium-sized enterprises] account for three-fifths of the employment and around half of the turnover. Total employment in SMEs was 16.6 million (60 per cent of the total), while turnover was estimated at £2.2 trillion (52 per cent). Of these, around 250,000 are ethnic minority-led, contributing an estimated £25 billion to the UK economy.
Any hit to small businesses will be a big hit to the national economy. Analysis over the last few weeks suggests that businesses are now re-opening, with 10 per cent remaining closed compared to 24 per cent in the week following the lockdown. Yet smaller businesses have been harder hit, with 17 per cent of SMEs reporting turnover had dropped by up to 20 per cent; 22 per cent reporting a drop between 20 and 50 per cent; and 18 per cent seeing a drop over 50 per cent.
It will take these small businesses time to recover, especially those in the hardest hit sectors. This is why the Federation of Small Businesses has called on the government to encourage local trading, ensure public sector procurement is fully accessible to small businesses during the recovery, and provide further support for small businesses with employment costs beyond the end of the Job Retention Scheme.
Beyond the economic response, the government needs to get Test, Track and Isolate fully operational and restore confidence in the health response so that the economy can grow. This is even more critical for BAME communities, who have seen a double hit in terms of the health impact and the economic fallout from this crisis.
Instead what we have seen is a frustrating drip-feeding of advice that has sometimes raised more questions than answers. Certainly, that is what we have had from local businesses in Hounslow. Many small businesses were shocked to find out they were not eligible for the Coronavirus Business Grant. The local authority tells me that that the discretionary business grants designed to plug the gaps in the initial round of funding will not stretch far enough to support all those who need it.
There is an important aspect to this which shows how the interests of large and smaller businesses are interconnected. Aviation shows this well, a sector dominated not just by large players, but by small businesses who form much of the supply chain. Larger businesses like Heathrow should review procurement processes post lockdown to ensure inclusion for local SMEs. Where SMEs can be engaged early as part of the supply chain, they can plan ahead in order to be able to hold on to the employment they can. This is particularly important as the furlough scheme begins to scale down. That’s why Labour has also called for longer schemes for harder-hit industries and for greater flexibility in furlough.
We need to be seeing more action now for an inclusive recovery. This week, I will be speaking at a Fabian Society event marking three years since the Taylor Review of modern working practices reported on how to achieve good secure work in a changing labour market. As yet, only seven of the 53 Taylor Review recommendations have been legislated for.
The economic fallout from Covid-19 has exposed the greater risk to jobs and incomes of those in precarious employment, with women, single parents, BAME communities, young people and the self-employed being hardest hit.
As the outbreak slows, communities need to work together and encourage friends, neighbours, and family to take the public health advice as seriously as they did at the beginning and adapt responsibly to changing circumstances.
But the government must do more to give clearer guidance and also get Test, Track and Isolate fully operational to help build vital public confidence. Conflicting advice from the government only hinders the fight against the virus, and additional confusion can happen when confused guidance is translated into different languages, as happened with face masks. Clear communication is vital in combatting the spread of Covid-19 and needs to be a greater focus now as a matter of urgency.