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12 April 2001

'FIVE POINT PLAN' OF ACTION PROPOSED AFTER SURVEY SHOWS IMPACT OF FOOT AND MOUTH CRISIS ON BUSINESSES

Reference number: NW13/01

A 'five point plan' of new proposals to assist small businesses through the foot and mouth crisis is being proposed by the Federation of Small Businesses (FSB), following a survey showing the crisis was yet to impact fully on such enterprises. The FSBs 'snapshot survey' of small businesses across the country shows firms believe that trade losses will continue during the next 12 months as well as in the immediate future. According to the survey, 75 per cent of respondents thought they would suffer losses of up to £20,000 over the next year. 80 per cent of respondents believed up to three-quarters of trade may be lost over the next 12 months. The survey also shows increasing numbers of businesses outside the farming and tourism sector are being affected, as are businesses located in urban areas. On a more positive note, small businesses are not laying off staff in great numbers. Over the next three months, 87 per cent of respondents do not think they will have to lay off workers, with 11 per cent believing they will have to lay off between one and four employees. The FSB is proposing a five point plan to alleviate the situation for affected businesses: 1 straight grants to be made available; 2 100 per cent rate relief for businesses with a rateable value of up to £50,000; 3 re-introduction of a small employers redundancy rebate scheme; 4 bankruptcy and insolvency laws to be suspended; 5 an extra bank holiday later in the year to benefit the tourism sector. Commenting on the survey and five point plan, Mr Ian Handford, the FSBs Policy Unit Chairman, said: "Any profit businesses make in the future may cover their overheads but will not make up for losses suffered during the foot and mouth crisis. That is why businesses expect to lose money over a long period. "Small businesses are suffering badly now but our evidence suggests the full impact has yet to bite. Our five point plan offers those affected vital assistance now and in the future." ends NOTES TO EDITORS: The FSBs five point plan in more detail: Straight grants to be made available for small businesses Livestock farmers have received direct compensation but evidence that increasing numbers of businesses from outside farming are being affected means that a similar package should be extended to more firms. Businesses need direct cash help now. 100 per cent rate relief for small firms with a rateable value of up to £50,000 Currently, 95 per cent rate relief is available on properties with a rateable value of up to £12,000. However, this ceiling excludes many businesses in high rateable value areas. Furthermore, many cash-strapped local authorities are refusing to make up the 5 per cent shortfall. A 100 per cent relief scheme operates in Wales; the FSB argues this should be extended to the whole country. Re-introduction of a small employers redundancy rebate scheme Small employers who have to lay off staff should qualify for a rebate scheme, similar to the one which operated until the 1980s. Businesses suffering trade losses are often unable to fund redundancy payments which would make the business insolvent, thereby resulting in even greater job losses. Bankruptcy and insolvency laws to be suspended for firms closing down Once a businesses is declared insolvent or bankrupt as a result of loss of turnover because of the crisis, the normal disqualification and bankruptcy rules should not kick in but a new 'closure status' announced, thereby sparing the business from asset stripping and the stigma of failure. An extra bank holiday later in the year to benefit the tourism sector The Easter weekend will see huge losses in the tourism sector and the introduction of an extra bank holiday later in the year could provide a much-needed boost to the tourist sector's turnover. The FSB is the UKs largest organisation representing the small business sector with 160,000 members. More information is at www.fsb.org.uk The survey was based on respondents to the FSBs website poll of businesses affected by foot and mouth disease. A summary is attached. The FSB was one of the first organisations to provide an emergency fund for members suffering from the effects of foot and mouth, when on 2 March, the FSB announced a £500,000 package for members in the form of interest free loans. The FSB also wrote to the main High Street banks; the British Bankers' Association; the Local Government Association; the Inland Revenue and Customs and Excise, urging them to show restraint towards small businesses and their overdraft and loan arrangements; business rate payments and tax remittances. As a member of the Rural Task Force, the FSB proposed the extension of the Small Firms Loan Guarantee Scheme, which last week was extended by the Government to include all sectors hit by foot and mouth disease. Latest failure figures from Dun & Bradstreet bear out the FSBs view that the real impact of the crisis is yet to come. Dun and Bradstreet reported reduced failure figures for the first quarter of 2001 compared with the final quarter of 2000, but predicted that the foot and mouth crisis has yet to have its full impact on failures. Their survey can be seen at www.uk.dnb.com/homepage/index.htm CONTACTS: Stephen Alambritis, FSB Press Office on 020 7592 8112 or 07788 422 155 David Hands, FSB Press Office on 020 7592 8113 or 07740 076 848 FEDERATION OF SMALL BUSINESSES (FSB) 'SNAPSHOT' SURVEY OF THE EFFECT OF FOOT AND MOUTH DISEASE March/April 2001 Summary (106 respondents) 1 26 per cent of respondents were in the pub/restaurant/hotel sector; 16 per cent were in retail; 16 per cent were in the service sector and 16 per cent were in farming, suggesting more and more businesses outside the agriculture sector are being affected. 2 Nearly half of all businesses (49 per cent) employ between one and four employees. 9 per cent employed 0-9; 9 per cent employed 10-14 workers; 7 per cent employed 15-19 and 14 per cent employed 20 and above. 3 89 per cent of respondents were based in rural areas and 11 per cent in urban areas. 4 Over the next three months, 55 per cent of respondents believe that up to 50 per cent of trade will be lost. 5 But many respondents are fearful of the 'slow-burn' effects of the crisis; 60 per cent believe that up to 50 per cent of trade would be lost over the next six months, with 52 per cent estimating these losses would continue over a year. 80 per cent of respondents believe up to three-quarters of trade may be lost over the next 12 months. 6 These findings are matched by the amounts of money respondents estimated they would lose. 84 per cent of respondents believe that losses would total up to £20,000 over the next three months. 7 84 per cent believe losses of up to £20,000 would continue over six months. Over a 12 month period, 75 per cent thought they would lose up to £20,000. 8 Small businesses are not laying off staff in great numbers. 81 per cent do not think they will have to lay off any staff over the next three months, while 19 per cent think they will have to lay off between one and four workers. 9 This statistic improves over time. The percentage of businesses who think they will not have to lay off workers over six months and 12 months increases (87 per cent and 93 per cent respectively).

Federation of Small Businesses Press and Parliamentary Office Westminster London SW1E 6HF Tel: 020 7592 8100 Fax: 020 7233 7899 Email: london.policy@fsb.org.uk website: www.fsb.org.uk