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Building back business – more support is needed to help small business owners recover from the pandemic

Harriet Dines, explores the findings of our latest report ‘Building back business’

Harriet Dines

Media and Engagement Lead at the Money Advice Trust

Posted December 15, 2021

It’s now almost 2 years on since the initial outbreak of Covid-19 which saw most peoples’ daily lives change dramatically, almost overnight. But the financial effects of the outbreak haven’t been the same for everyone, and a growing body of evidence is confirming the sheer scale of the disproportionate impact it has had on self-employed people and small business owners.

Findings from the Office of National Statistics show that by April 2021 self-employed people were three times more likely to report a reduction in income compared to their employee counterparts.

The impact on small business owners has been far from equal. Many people will have seen their business’ trade and income recover to relatively normal pre-covid levels since the outbreak first hit. But for others, a growing burden of debt and businesses that are still being affected means the road to recovery is far longer.

Our new report Building back business: Tackling small business debt in the wake of Covid-19 takes a closer look at the self-employed people and small business owners caught at the sharp end of the crisis.

The findings, based on a survey of more than 280 callers to our Business Debtline service, reveal a worrying trend toward an increasing burden of personal and business debts, an ongoing impact on incomes and businesses, and real uncertainty and worries about the future. For those who went into this pandemic already experiencing problem debt - and many of the people we surveyed did - these challenges are particularly acute.

Businesses are still feeling the impact

Almost 9 in 10 (89%) Business Debtline callers we surveyed said that Covid continues to negatively impact their business. Amongst these callers, 58% put this down to lack of trade, indicating that more than a year and a half on from the initial outbreak many are yet to see a return to pre-Covid business income levels.

This ongoing uncertainty around trade is causing real worries for the people we surveyed– 79% said that they were regularly losing sleep due to the impact that Covid continues to have on their business.

As the virus continues to disrupt peoples’ lives, the impact of falling ill can be particularly acute for self-employed people running a business alone – 66% of the people we surveyed identified as such. Without access to sick pay, every day off sick with the virus is a days’ lost income.

These factors play a part in whether people have been able to recuperate losses experienced during the outbreak, or even continue to afford to run their business. For one in five of the people we surveyed (20%), Covid had led to an inability to pay for their business expenses.

And while many had accessed help through one or more of the support schemes made available by the Government and regulators during the outbreak, more than a fifth (22%) had not received any help at all. Universal Credit was the most commonly received form of support amongst our sample (36%), but the recent £20 per week cut in payments, as well as the reinstatement of the Minimum Income Floor, will likely bring added financial challenges.

An increasing burden of debt

It’s not surprising then that many of the people we surveyed had fallen into debt during the outbreak. Six in 10 (62%) had fallen behind on one or more business bill due to Covid, with more than a half reporting falling behind on their household bills (55%). Energy was the most common household bill people reported falling behind on (25%). With energy costs already rising as we enter the winter months, these debts are only likely to increase for those who are already struggling.

At the same time, 21% said that they had taken out new credit products to help deal with the impact that the outbreak was having on their business. It is not unusual for small business owners and self-employed people to use credit to help with cash flow and other issues, but when personal credit is used in this way things can get more complicated as personal and business finances become mixed. Worryingly, 17% of the people we surveyed said that they had turned to personal credit to support their business.

With the cost of living set to increase in the coming months, for people whose businesses are still being impacted by the outbreak, this reliance on credit has the potential to lead to further debt issues down the line.

Worries for the future

For many of the callers we surveyed, uncertainty continues to cloud their view of the future and their expectations for the recovery of their business and income. A high proportion (78%) said they were worried about the future of their business, with two in five (42%) thinking it very likely that they will experience another income drop in the next year.

Clearly, many expect that the worst is not yet over. Perhaps more concerning was that 38% were unsure as to how long they would be able to keep trading. With self-employed people estimated to have contributed £316bn to the UK economy last year alone, worries around the future of some peoples’ businesses should be cause for concern for policy makers seeking to limit the impact of the virus on our wider economy.

Bounce Back Loans – lifeline or added burden?

Repaying debts accrued over the course of the outbreak and lockdown period posed a key challenge for many of the people we surveyed. A case in point can be found in the repayment of the Government’s Bounce Back Loan scheme – the most popular of the Government’s coronavirus business loans. Just over a fifth had taken out a loan under the scheme.

There have been well documented concerns around affordability and credit checks for repayment of Bounce Back Loans, and our advisers at business Debtline are already speaking to callers who are worried about repaying them.

While the introduction of the scheme has undoubtedly provided a lifeline to many, of the people we surveyed who had taken out the loan, almost half (48%) said that they were due to make repayments but had not been able to afford to do so. 41% were unsure about whether they would be able to make repayments at all.

The Government’s rationale of getting payments to people quickly was important, but our findings show that even with the introduction of Pay As You Grow, which allows more time to repay amongst other forbearance, the loans are likely to remain unaffordable for some people still dealing with the fall-out from the virus. Especially those whose businesses are no longer viable. It is important that this is taken into account in decisions around how the loans are collected.

Without standardised collection guidance for when repayments are not affordable, as is currently the case, there is the risk that some self-employed people and small business owners could be left without a clear understanding of what happens when they cannot make their repayments. And for those already experiencing problem debt, this could risk disrupting or halting their access to a safe route out.

The need for more support

Ongoing support is needed for these small business owners and self-employed people still reeling from the impacts of Covid. It cannot just be a return to “business as usual”.

As we set out in our report, our recommendations are simple.

  • We’re urging HM Treasury and the British Business Bank to work with lenders to ensure there is a consistent, fair and affordable approach to recovering Bounce Back Loans. This should include publishing clear and consistent guidance on collection and forbearance for lenders to follow.
  • For regulators, we’ve welcomed the FCA guidance for supporting consumer credit customers impacted by coronavirus so far, but this has not been matched in the support for business customers. We’re calling for creditors (including firms and government departments) to offer specific forbearance to self-employed people struggling to repay Covid-related debts and have a clear strategy on how to support self-employed people and small business owners in financial difficulty.
  • Finally, in order to support self-employed people on the lowest incomes and those facing a continued impact on their business, we’re urging the Department for Work and Pensions to review the support available for self-employed people, including reviewing the Minimum Income Floor in Universal Credit.

This research was conducted by Money Advice Trust with support from JPMorgan Chase. The figures presented have been analysed independently by Money Advice Trust. The views expressed here are not necessarily those of JPMorgan Chase. We look forward to discussing our findings and recommendations with policy makers and other stakeholders in the coming weeks and months.

Read the full report at

Harriet Dines

Media and Engagement Lead at the Money Advice Trust

Harriet is the Money Advice Trust's Media and Engagement Lead. She joined the charity in January 2020 as Policy and Communications Officer, having previously worked as a Parliamentary Researcher and Communications Officer. View all posts from Harriet Dines.

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