Pandemic financial costs for independents revealed in report

Independent businesses will emerge from the pandemic with almost five times more debt than they had before, but engaging with the local community is the path to survival, according to the latest Grimsey Review.

The review paints a worrying picture for independents – warning that Britain is facing a fresh wave of closures this autumn and calling for the government to write off government-backed loans for viable small businesses, as has been the case in France to save small business. 

“Most have been forced to take on unsustainable levels of debt and many are teetering on the brink as a result. Urgent support is required to stop a tsunami of closures,” said the report. 

Strong neighbourhoods are what counts, it says because people have a “fundamental need for connection and community, and independent shops are well positioned to benefit from this”.

“Research from Lumina Intelligence in their Future of Convenience Report 2021, for example, says three quarters of shoppers indicate that supporting local suppliers and retailers is important to them,” said the report, adding that customers returning to stores feel reassured local shops will keep them safe rather than visiting big shopping centres.

“Not only have they been astonishingly resilient to survive the pandemic, but they’ve come to be more appreciated and cherished. Research during 2020 showed that two thirds of shoppers were more likely to shop in their local communities than they were a year ago.”

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A total of 47% of retailers at significant risk of failure and there have been 149 major failures since the start of 2018 affecting 227,000 jobs and 11,500 shops.

The Grimsey Review highlights financial support provided by the government in the form of £100 billion invested into the furlough scheme and other job support measures and providing £76 billion through government-backed loan schemes. Other measures have included VAT and PAYE payment deadlines being relaxed. Yet, it also points out that debt taken on by many small businesses has soared – £1.7 billion across 145,941 independent businesses.

“However relaxed the repayment terms might be or however low the interest rates are, this is real debt which has to be repaid. The Office for Budget Responsibility has predicted that around a third of all BBLS debts will eventually default, suggesting that some 49,000 of our independents are at risk of failure from this cause alone. How will the government deal with the debt default crisis?” it states. 

“The first repayments on [the Bounce Back Loans] started falling due in May 2021, so already banks will be finding borrowers unable to even begin to pay back their debt. The French government is proposing to turn €130bn of pandemic support loans into grants. A similar approach is needed in the UK.”

The report calls on the government to ditch business rates, describing them “archaic” and “a barrier to innovation”.

It also recommends VAT/PAYE deferrals to help businesses wean themselves off government covid support schemes; the tightening of filing deadlines Companies House so that suppliers and credit insurers have up-to-date financial information independent businesses so properly-informed and constructive credit decisions can be formed; a two per cent sales tax at the point of sale for all retail sales. 

Throughout the covid crisis there has been innovation; the entire sector has experienced a dramatic shift of shopping from physical stores to online. The overall value of retail sales had risen by 0.9% in March 2021 compared to February 2020, according to the Office for National Statistics (ONS). But the value of online sales soared from 20.2% prior to the pandemic to 32.8% in March 2021, peaking at 36.4% in January 2021 just as the third national lockdown got underway. 

“As well as developing an online presence, many have innovated in terms of physical distribution. This includes delivering directly to consumers or setting up a click and collect service. Stoppards, a butchers in Southwell, began offering a ‘call and collect’ service to allow people to order and pay by phone. Staff helped customers put their shopping straight into their cars to provide a ‘drive through’ service,” said the report.

A local Bike Drop delivery service was launched in Stroud, offering bike deliveries through a Community Interest Company that were used primarily by food retailers, but was also optimised by Specsavers to deliver prescriptions. 

“The pandemic also created new short and long-term collaborations. Independents connected with others in the same sector but also with different types of business. Frippery, a lifestyle boutique in Colchester, collaborated with a nearby artisan coffee shop Sir Isaacs Coffee House, to offer a click-and-collect service on its behalf. This enabled Frippery to continue serving its customers online, while the coffee shop got more exposure and sold more coffees,” said the report. 

Finally the Grimsey Review puts big emphasis on retailers being a part of a strong network – whether that is the local community, a community of other retailers or in terms of formal independent business support groups.