HOM MANY WILL SURVIVE AS CORPORATES PREPARE TO KILL OFF SME’S?

How many will survive? You can read EVERYWHERE about how people are facing a crisis. It is in my view a triple whammy caused by rising prices, Brexit and the energy crisis but let me inform you there is a fourth problem that is coming later in the year, crippling unemployment as the sector thatContinue reading "HOM MANY WILL SURVIVE AS CORPORATES PREPARE TO KILL OFF SME’S?"

HOM MANY WILL SURVIVE AS CORPORATES PREPARE TO KILL OFF SME’S?
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How many will survive?

You can read EVERYWHERE about how people are facing a crisis. It is in my view a triple whammy caused by rising prices, Brexit and the energy crisis but let me inform you there is a fourth problem that is coming later in the year, crippling unemployment as the sector that provides the most jobs in Scotland is put to the sword….the small business sector, estimated to provide 16 million jobs in the UK. 52% of businesses in a recent survey thought it possible they would close for good in the next 12 months.

This is the certain impact of this cost of living crisis and it is already happening on a widespread basis. People, that is customers, are already feeling the pinch horrified at the food price rises and absolutely terrified about the huge hike in energy costs. Add on mortgage interest rate rises and inflation running at more than 10% and that means household and individual disposable income is disappearing like snow off a dyke! With that comes vanishing spending on “luxury activities” 

For luxury spending read going to the hairdresser, getting your nails done, going out for a meal with friends and family, visiting the pub for a couple of drinks on the way home, having a couple of nights in a hotel to celebrate a special birthday, calling a taxi, buying a magazine, going for a “run” in the car visiting beauty spots, going or holiday or a weekend break. Business is already reporting dire drops in custom. The worse hit areas are those businesses operating in working class areas where disposable income was already scarce before this disaster hit. What we are looking at here is a growth in commercial deserts where big areas will be left with no pubs, no restaurants, few hairdressers and beauty salons. Those jobs will be amongst the first to go, it has already started and will grow in pace in the next few months. I expect this winter to be the worst in business terms any business owner in these sectors will ever have faced. What do you do when your customers are petrified of spending money? 

Rather than talk in generalities here is the position in a business where I am involved on the fringes. It opened in 2018 after an investment in excess of £300,000. Initially it was hugely successful turning over between 10k and 13k a week. It was open seven days a week and operates in a mainly working class area. THEN COVID ARRIVED. People quickly became scared to go out, particularly pensioners who until then had provided the bulk of the lunch trade. Then came the full closures, the stop/ start period. We lost some quality staff as people understandably looked for a new job in a more stable business sector as the business was constantly being disrupted by closures or restricted opening hours. We noticed some of our key suppliers were no longer able to carry on as their customer routes had been decimated by other businesses closing but not reopening. Their supplier runs were no longer profitable because of this. Some of our suppliers, particularly the large ones, doubled the minimum order businesses could order as fuel prices rose.

Where are we now? We are open three and a half days a week. Our turnover is round about a third of what is was as is our staff numbers. It is impossible to open for longer hours as the customers are no longer there and the energy cost of opening without sufficient customers is already severe before the latest increases impact. THERE IS NO PRICE CAP ON ENERGY COSTS FOR BUSINESS. The Royal Crown takeaway in Aberdeen closed this month after being hit with a bill TEN times what they were currently paying to SSE.

NOW HERE IS THE REALLY WORRYING THING. WE ARE ONE OF THE HIGHEST RANKED BUSINESSES AND MOST POPULAR IN OUR SECTOR, NOT JUST IN OUR TOWN, BUT OUR ENTIRE COUNTY.

Don’t think this crisis will only impact the private sector. Local authorities and HMRC are in for a huge financial collapse as well. Very few businesses, if any, will be able to pay their business rates. They are a clumsy, stupid tax on business that takes no account of trading conditions or the ability of businesses to pay. They will be levied on our business at exactly the same rate for our opening three and a half days as they did when we were open seven. They have no flexibility whatsoever. As for HMRC they must be staggered that at a time when their income is about to collapse the wannabe Tory leader is urging tax cuts. What World is she living in?

So to the public sector “enforcers” turning up to take their unearned cut from all these businesses that are providing the all the local jobs, providing services in areas where the local authority no longer provide any meaningful services, you guys are going to be in for the most extensive widespread shock. Businesses will not be able to cough up, not a can pay, won’t pay campaign very much a can’t pay, even if you are holding a revolver to the owners head. If you pull the trigger you kill the business for all time and the jobs of everyone employed there. Your choice?

Corporation tax requires businesses to be profitable to be liable to pay tax. I wonder what the scale of the collapse in Corporation tax will be next year? It is going to be huge. This crisis will eventually result in huge job losses in the public sector as well. So HMRC face lost income from fewer workers, lower tax, most often from non existent profits, fewer employers and employee contributions while the exceedingly dim Liz Truss plans her huge tax giveaway. Prepare for a giant U Turn when somebody gives her the true figures!

So who wins? Well the answer to that is even more upsetting. The winners will be the giant corporations. Getting rid of a huge swathe of those pesky small business operators who contest the corporation’s ability to operate virtual monopolies and price gouge the public will be very welcome to them. They will regard this crisis with glee, they can afford a loss leader period for a couple of years if it kills off the SME competition and leaves them a free hand in the future.

You know when you read all that it virtually reads as a corporate plan. How did they convince the wind, water and tides to quadruple their prices to us?

Another question I would ask is this, if the reason for these obscene rises are the Worldwide wholesale prices for energy, and the UK is one of the richest countries in that World, how are the poorer nations going to manage? . Is Africa facing the prospect of being unable to afford one lightbulb per township?

I get the impression that this energy crisis is contrived to extract huge amounts of money from the working and middle classes to further enrich the already obscenely rich tiny percentage. The idea being to make both the working and middle classes more reliant ( and therefore most desperate and grateful for any crumbs that may fall from the table) giving the greedy even more power and influence.

If so they are displaying the same space cadet thinking that Liz Truss displays, what they are in truth creating is the optimum conditions for a real revolution. When the middle and working classes unite, Governments and the Corporations face disaster. It can’t come soon enough for me! Up the revolution!

I am, as always

Yours for Scotland.

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