Kemi Badenoch, the business secretary, is facing calls from hospitality industry chiefs to extend new financial help to businesses by amending the terms of emergency loan schemes set up during the pandemic.
In a letter seen by Sky News, Kate Nicholls, chief executive of UK Hospitality, urged Ms Badenoch to work with the British Business Bank (BBB) on extending repayment terms included in the Coronavirus Business Interruption Loan Scheme (CBILS).
Ms Nicholls said her members were reliant on such help being afforded at a time when many are locked into expensive multi-year energy supply contracts.
She cited research showing that almost a third of UK Hospitality members were worried about collapsing in the next year, with the overwhelming majority linking this concern to their energy bills.
“An issue compounding this is a lack of cashflow associated with debts resulting from COVID,” Ms Nicholls wrote.
“A substantial number of businesses are still repaying bounceback loans and Coronavirus Business Interruption Loans (CBILs) – where interest rates on repayments has risen to around 8-10%.
“Inflexibility from HMRC on the application of Time To Pay concessions is also damaging the ability of some businesses to function.”
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Ms Nicholls highlighted the fact that participating banks are not allowed to extend CBILs repayment terms other than in exceptional circumstances, but that doing so meant a company must declare itself ‘severely compromised’, which triggers a negative impact on its credit rating.
The UKH chief called on the business secretary to work with the BBB to draw up a revised set of conditions for the extension of CBILS loans “with a presumption in favour of extension for businesses that have been adversely, in the short-term, been affected by the energy crisis”.
“This should also have no impact on a business’ credit rating as it would be considered a standard refinancing,” Ms Nicholls said.
“Alongside this advice should be given to HMRC to take a more lenient approach to Time To Pay (TTP).
“We have evidence of fully viable businesses being refused TTP despite documenting their cashflow and the short-term nature of their liquidity squeeze.
“This is predominantly caused by energy suppliers demanding extortionate deposits, and the slowness of others in paying back deposits.”
UK Hospitality’s warning underlines the squeeze that many businesses are dealing with despite recent falls in wholesale gas prices and the consequent declines that households are seeing on their domestic energy bills.
In recent weeks, the chancellor, Jeremy Hunt, has facilitated support to mortgage customers through a new charter hammered out with the banking industry.
“A further measure to support business at this time would be to extend the guidance the chancellor gave to banks in relation to mortgages, with no fault payment delays, to business customers,” Ms Nicholls wrote.
“These issues are critical to the survival of thousands of businesses in the hospitality sector.”