Should government money go to 'big business' over SMEs during COVID-19?
Last week, only one in five businesses were granted the coronavirus funding support they applied for. With billionaire Richard Branson seeking government funding for his company, Virgin Atlantic, it raises the question of who should gain priority funds, large multinationals, or the UK's 5.9m SMEs, that account for over 99% of all UK businesses? In an open letter to Virgin Atlantic's 8,571 employees, Richard Branson said he is looking for £500m from the Government to prevent the airline's collapse as the "uncertainty" in the travel market, caused by coronavirus, continues. However, he maintains he is seeking a commercial loan which will be "repaid on commercial terms."
Branson seeks funding
Branson has already come under fire for making his staff take a six-and-a-half month wage reduction, including eight weeks of unpaid leave, which he says was done to "save as many jobs as possible." He also said his staff supported his decision and "virtually unanimously decided to take a wage reduction" in order to preserve jobs. Critics, including a number of politicians, claim Branson is able to pay his staffs' wages in full for at least a period of time. Tory MP, Richard Fuller, believes if Branson relinquished the business interest he makes "for eight weeks", he would be able to pay Virgin Atlantic employees. Branson has used easyJet's £600m funding from the Government as a case for Virgin Atlantic to be awarded a similar amount, saying; "the reality of this unprecedented crisis is that many airlines around the world need government support and many have already received it."
The Government rejects his first bid
While aviation, along with the travel industry has been one of the most affected sectors since the outbreak began, where the dent in the travel sector could see the eradication of 50m jobs globally, according to the World Economic Forum, (WEF); Branson is yet to persuade the Government that he deserves the bailout money. In fact, his initial bid left officials "unimpressed" and questioned whether he had fully explored other funding options. Only last month, the chancellor said the Government wouldn't pursue a national bailout of airports and airlines, and suggested firms pursue other methods of funding before turning to state aid. However, Branson isn't the only high profile business owner taking advantage of the Government's coronavirus support measures, retail magnate and Arcadia Group owner Philip Green is doing it too. Philip Green seeks government support too Like Virgin Atlantic, Green's business is a big employer in the UK. But since the outbreak began, he has been asking the Government for support and recently furloughed 14,500 staff.
In a style Green has employed before with his old company, British Home Stores, he has suspended pension payments to the Topshop retirement scheme. Green's wife, as a majority owner of the Arcadia Group, (that also owns retailers including Burton, Miss Selfridge and Dorothy Perkins), is being pressured by pension experts to "plug the difference" in the pensions gap before history repeats itself. As the Government's coronavirus funding schemes were largely aimed at the nation's small-to-medium firms, we wanted to hear from SMEs themselves on who they think should be getting the funding... SMEs speak out Ranbir Sahota, founder of technology PR firm, Vitis PR says coronavirus could have been an opportunity for business giants like Branson and Green to 'give back' to their workforce; “As a result of COVID-19, I’m pretty sure we will all face tax increases, so to hear that the likes of Richard Branson and Philip Green want public sector hand outs is appalling. Virgin asked staff to take eight weeks unpaid leave, and Green left a lot of BHS staff no doubt feeling scared and vulnerable about their pensions – but he did cough up in the end with some pressure thankfully. While most SME owners are trying their best to keep afloat and support their staff, these guys didn’t do the right thing. I can imagine that some SME owners are having to fall back on their own savings to bailout their companies. These two have huge personal fortunes – now is the time for them to use some of them to help their employees at what is the biggest crisis the world has seen for years.” Richard Skellett, founder of social enterprise Digital Anthropology says the Government should prioritise funding SMEs during COVID-19 and that big players like Branson and Green are taking advantage of the system; “The government must be doing more to ensure that SME’s are supported before jumping to the rescue of Richard Branson or Philip Green. Those organisations have taken advantage of furlough and have routes to support that SME’s do not have. It will be the SME’s that will fuel the growth in our economy and it’s those organisations who operate simple structures. Those SME’s don’t have complex global tax structures to avoid tax. It’s those simple tax structures that will return funds to the government not those moguls who avoid tax.” Read the full article
