Small businesses in the UK have been through a lot over the past few years. The Covid Pandemic caused many businesses to shut down either permanently or temporarily costing business owners billions in revenue. To help the economy recover, the government offered various restart grants for small businesses to get back on their feet. While these grants have now ended, they were replaced with the Recovery Loan Scheme that is still available to small businesses.
This article will discuss the different grants that were previously offered including the Restart Grants for Small Businesses and the current Recovery Loan Scheme. We will look at the impact they had and are having on small businesses as well as how the UK economy is dealing with the aftermath of the Pandemic and other current global issues.
The Small Business Restart Grant
The March 2021 Restart Grant was available to small businesses in the UK that were forced to close due to Covid restrictions. It provided up to £18,000 for businesses that were able to reopen after the lockdown ended. The grant helped businesses with the costs of reopening such as rent, rates, and utility bills and was available for businesses that reopened on or after the 12th of April 2021.
How Could Businesses Access the Grant Money?
During the time the Restart Grant was available, businesses could apply for the grant through their local authority. The grant was then administered by those local authorities and businesses were required to provide evidence that they had been forced to close due to Covid restrictions. This could include a copy of their business rates bill or utility bills.
Was it Effective?
Thousands of businesses were able to benefit from the Restart Grant and open their doors again after incredibly difficult times. Alongside other government support such as the furlough scheme, the restart grant helped many businesses stay afloat during the pandemic and keep their employees in jobs.
The Additional Restrictions Grant
The Restart Grant ended on the 30th of June 2021 and was replaced by an extension of the Additional Restrictions Grant (ARG). This was a discretionary fund that was available to help businesses in England that had been adversely affected by the pandemic.
How was ARG Funded?
Under the terms of the ARG, local authorities were given taxpayer money to distribute among businesses in their area that need support. There were various stages of government funding for ARG over the past two years with more money being made available each time:
31st October 2020 – The Government first announced additional support for small businesses in areas of Tier 3 and national restrictions.
5th January 2021 – The Government provided £500 of support for local authorities through the Additional Restrictions Grant.
3rd March 2021 – The Government provided an additional £425 million of support for local authorities through a top-up to ARG.
21 December 2021 – The Government provided an additional £102 million of support for local authorities through a final top-up.
Who was Eligible for ARG?
To be eligible for ARG, businesses had to demonstrate that they had been forced to close or severely restricted due to the national or local Covid restrictions in place at the time. As with the restart grant, businesses could apply for the grant through their local authority who would then decide if the business was eligible and how much money they would receive.
What did ARG Provide?
The grant provided businesses with a one-off payment to help with the costs of reopening or continuing to trade during the pandemic. The amount of money available depended on the rateable value of the business premises:
Non-essential retail – Up to £25,000
Hospitality, accommodation, leisure, gyms and sports facilities – Up to £25,000
Entertainment venues – Up to £25,000
The Impact of ARG
As with the Restart Grant, ARG helped many businesses keep their heads above water during the pandemic. It also ensured that many jobs were kept which might otherwise have been lost. In conjunction with the other support provided by the government, ARG was a lifeline for many businesses that were struggling to make ends meet due to the restrictions in place. The grant was withdrawn at the end of 2021 with the government judging the Pandemic to be under control with the successful rollout of the vaccine and booster campaigns.
The Omicron Hospitality and Leisure Grant (OHLG)
OHLG was available to businesses in the hospitality and leisure sector in England that were forced to close due to the national lockdown restrictions. It was introduced on December 21st 2021 when the newly discovered Omicron Variant forced the government to enforce new restrictions while the variant was being studied.
Who was Eligible for OHLG?
All businesses in the hospitality and leisure sector were able to apply for the grant. This included restaurants, bars, hotels, B&Bs, gyms, sports clubs and leisure centres. The money was made available after Christmas when the government first introduced the restrictions, having been reluctant to do so before the holiday in fear of public pushback.
What did OHLG Provide?
The grant was a one-off payment of £6,000 which was intended to help businesses with the costs of closing down during the restrictions. The grant was administered through local authorities who, as with the other two grants discussed, decided which businesses received the money.
What was the Impact?
Fortunately, while the Omicron Variant was found to be more contagious than the previously dominant Delta Variant, it was also found to be far less deadly. This meant that the restrictions were only in place for a few weeks and businesses were able to reopen quickly once the all-clear was given. However, many businesses found themselves struggling to make ends meet after such a difficult year and the OHLG grant was a welcome boost.
The Recovery Loan Scheme
The Recovery Loan Scheme (RLS) is a government-backed loan scheme that was introduced in April 2021. The scheme originally provided loans of up to £2 million for businesses of all sizes (or £6 million for business groups) that were struggling due to the pandemic. This changed in January 2022 when it was closed to businesses with turnovers above £45 million.
Who is Eligible?
To be eligible for a loan under the RLS, businesses must be based in the UK and have been impacted by Covid-19. The business must also be able to show that it has a viable plan for recovery.
What do the Loans Provide?
The loans are provided by a number of accredited lenders, including banks, asset-based lenders and challenger banks. Loans under the RLS can be used for a variety of purposes, including working capital, investment in plant and machinery or property development. The loan can also be used to refinance existing debt.
How to Apply
The first step is to approach an accredited lender and discuss your business needs. The lender will then carry out an assessment to see if you are eligible for a loan under the scheme.
If you are successful, the loan will be made available to you on commercial terms. This means that you will be required to pay interest on the loan, as well as any fees charged by the lender.
Types of Finance Available Through the Recovery Loan Scheme
There are four types of finance available to small businesses up to the value of £2 million;
Term loans: These are loans that must be repaid over a fixed period of time, typically between two and five years.
Overdrafts: An overdraft is a type of loan that allows you to borrow money up to an agreed limit. The interest on the overdraft is charged on the amount you actually use, rather than the limit.
Invoice finance: This type of loan allows you to release cash that is tied up in unpaid invoices. The lender will advance you a percentage of the value of the invoice, minus any fees.
Asset finance: This allows you to finance the purchase of plant and machinery or other business assets. The asset acts as security for the loan, which means that you may be required to provide a personal guarantee.
Guarantees for RLS
The government will provide a guarantee of 70% for loans made under the scheme. This means that if you default on the loan, the lender will only lose 30% of the amount advanced. However, as the borrower, you remain liable for 100% of the debt.
For loans under £250,000, the lender will not be able to request a personal guarantee from the borrower. For loans above £250,000, the lender may request a personal guarantee but cannot hold a guarantee over your personal private residence. This is so that you are not put in a position where you could lose your home if you default on the loan.
When will RLS End?
The RLS is due to run until 31 December 2022, although this may be extended if the pandemic continues to have an impact on businesses. If you think that your business might be eligible for a loan under the scheme, you should contact your bank or an accredited lender to discuss your options.
How is the UK Economy Recovering from Covid?
The UK economy is slowly recovering from the effects of Covid-19, although there are still some sectors that have been hit hard by the pandemic. The construction and hospitality sectors have been particularly badly affected, with many businesses forced to close their doors.
The official government line is that the UK has the fastest growing economy in the G7 however many opponents and economists disagree with this claim. They argue that the UK is in fact lagging behind other countries when it comes to economic recovery. Furthermore, while the economy may be growing, it is still far below the level it was before Covid hit.
The Effect of Brexit on the Recovery
It is still too early to say definitively what effect Brexit will have on the UK economy. However, there are some signs that it is already having an impact. For example, the value of the pound has fallen sharply since the UK left the EU, which has made imports more expensive.
During the height of the pandemic, the government said that leaving the EU meant they were able to roll out the vaccines more quickly and provide a more generous furlough scheme than would have otherwise been possible. However, many businesses have said that Brexit has made it harder for them to trade with EU countries and has added to the overall uncertainty.
The Effect of Russia’s Invasion of Ukraine on the Recovery
The effect of Russia’s invasion of Ukraine is also difficult to quantify but it is clear that it has had a negative impact on the UK economy. The sanctions that have been imposed on Russia by the EU have hit the UK’s financial sector hard, with many banks and businesses having to cut ties with their Russian counterparts.
It has also contributed to already sky-high petrol and gas prices which are impacting businesses and consumers alike. With the war still ongoing at the time of writing (April 2022), it is difficult to say how much further the UK economy will be affected.
The Cost of Living Crisis
The cost of living crisis is one of the main factors that is hampering the UK’s economic recovery. The pandemic has hit many people’s incomes hard, with wages stagnating and job losses rising. This has led to an increase in the number of people claiming benefits and using food banks.
The government has been criticised for not doing enough to help those on low incomes, with many calling for an increase in benefits and a reversal of the National Insurance increase and the cuts to Universal Credit. Of particular concern is the rise in household energy bills which have already hit record highs and are only set to increase further.
There will be many questions asked over the coming years about the government’s response to the Pandemic, however, most people agree that the financial support given to businesses was vital in saving many jobs and industries. Restart Grants for small businesses as well as the other grants and loans described in this article have been a huge help and the government deserves great credit for keeping businesses afloat. Whether the UK is able to fully recover from the Pandemic will now somewhat depend on how the global situation as well as the impact of Brexit pan out.