'Watching us bleed to death': Limited companies beg chancellor for more support

'Watching us bleed to death': Limited companies beg chancellor for more support
By: Business Posted On: May 28, 2020 View: 105

'Watching us bleed to death': Limited companies beg chancellor for more support

Directors of limited companies say they have been left to "bleed to death" by Chancellor Rishi Sunak during the pandemic.

Working to keep their businesses alive means that although they are eligible for the UK government's furlough scheme, it's often not a realistic option and they are not eligible for the self-employment income support scheme.

They say they've been left to "fall through the cracks" during the coronavirus crisis and have called on the chancellor to assess their situation as part of his expected update to the scheme.

A notice is seen on a door at Fortnum & Mason, the department store in London's Piccadilly, pictured after it was reported to be furloughing 700 employees while the spread of the coronavirus disease (COVID-19) continues, in London, Britain April 9, 2020. REUTERS/Henry Nicholls
Image: A quarter of the UK's workforce is covered by the furlough scheme

There are two million limited companies registered in the UK. Many have more than one director.

They are often small businesses, such as mobile hairdressers, plumbers, electricians and other freelancers working from home. Some 710,000 in the UK are one-person bands, with just one director and no staff.

Directors often take very small salaries and pay themselves dividends if the company makes profit.

But this means it's hard for the government to assess where dividends are taken as income and where they are being taken as part of a portfolio of investments, and so it's been hard to design a scheme to accommodate these people.

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Mustafa Fuat is the founder of Gosha London Ltd. It produces samples and garments for luxury women's wear designers.

Orders have completely dried up, and although they have been making hospital scrubs and gowns for the NHS, Mustafa has had to furlough most of his seven staff.

"It's been sleepless nights, worrying about whether we're going to get orders," he explained.

"We've had no help from the government, apart from a £10,000 grant from the council, but that's not going to go far with my rent. Apart from that, I've got personal finances at home, I've got a mortgage at home, I've got a family to keep as well - it's been really desperate."

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Image: Limited companies are often small businesses, such as mobile hairdressers, plumbers and electricians

He said he feels angry and let down that his business is being forgotten.

"I feel really sad sometimes. I get some weeks where I come in on my own, and the studio's empty and the thoughts going round my head, [I'm] not hearing the machines going, the staff laughing, it's hard to describe.

"What the chancellor's done is he's cut us and he's watching us bleed to death."

According to data from The Association of Independent Professionals and the Self-Employed (IPSE), many directors are facing a perilous situation.

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Image: The furlough scheme has cost £14bn a month - but limited companies say they've fallen through cracks

It's reported that 39% of limited company directors who work as a one-person band think they won't have enough money to cover rent, bills and basic living costs, and 49% think they'll have to close their businesses.

The situation is just as bad for those with employees to support.

Around 7.5 million people in the UK are employed by limited companies.

Many directors have put their employees on furlough and say the lack of support means those staff won't have jobs to come back to.

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Gina Broadhurst, a small business owner and co-founder of the pressure group #Forgottenltd, said: "I don't understand how we are expected to continue to employ millions and contribute to the economy and be an integral part of the supply chain.

"I know people who have tens of pounds in their bank account, they've romped through their life savings essentially to prop their business up, they've taken massive bounce back loans where they've never had debt previously and that's the only thing keeping them afloat.

"But we don't think debt is the answer. Why should one section of society be forced to solve the problem with debt, whereas other people have grants? It's not fair and equitable."

The government has put billions into an unprecedented package of support for workers and businesses through the pandemic. This includes backing of over £22bn worth of loans for small, medium and large businesses.

This week, Mr Sunak answered a question on Twitter about limited company directors, writing: "Many directors pay themselves a salary through PAYE and can be furloughed."

He also said it was hard to distinguish between those who take dividends from companies they are involved with and those who take dividends from investment portfolios.

"I don't think it would be right to be giving huge grants to those with investment portfolios," the chancellor wrote.

Next week from Monday to Thursday, Dermot Murnaghan will be hosting After the Pandemic: Our New World - a series of special live programmes about what our world will be like once the pandemic is over.

We'll be joined by some of the biggest names from the worlds of culture, politics, economics, science and technology. And you can take part too.

If you'd like to be in our virtual audience - from your own home - and put questions to the experts, email afterthepandemic@sky.uk

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