10 December 2020
Analysis by the University of Edinburgh Business School of surveys completed by over 300 small company directors shows that the vast majority, 80%, have not been able to access financial support.
Company directors contribute £154 billion a year to the UK economy, helping drive growth and innovation. Their role will be crucial as the UK looks to create new jobs and rebuild the economy.
The research found that 62% of small company directors, in sectors as diverse as the creative arts, finance, and technology, have seen their incomes fall by an average of 68%, and 56% have cash flow concerns.
Four out of ten (41%) have used their own savings to keep their businesses afloat.
Francis Greene, Professor of Entrepreneurship at the University of Edinburgh Business School, said:
"Company directors have fallen between the cracks because they are ineligible for the Self Employment Income Support Scheme (SEISS). Given their role in generating economic activity and jobs, it is vital that they are supported. As one company director told us: 'We serve the needs of larger businesses and thus improve their efficiency and productivity and help make them successful'.
"Introducing loan forgiveness, modelled on the United States government's principal wage subsidy scheme, would be one way forward. The scheme works by asking small businesses to provide financial information to banks who evaluate loans against government eligibility criteria. Once the loan is agreed it can be forgiven if used to subsidise wage costs.
"Interim studies of the US loan forgiveness scheme have been favourable. It has increased business survival rates, had positive employment impacts, and monies were quickly disbursed through the banking system to businesses. The UK Chancellor must look at a similar scheme here."
The Edinburgh academics' report explores why company directors might not have been eligible for SEISS. One reason is that HMRC suggests that it is operationally difficult to identify if a company director's dividends are income from their company or from other soures. The report also found that only 20% of company directors had accessed the furlough scheme, as they often cannot work on a part-time basis.
Copies of the report are available on request from Professor Francis Greene.