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Open Letter to the Chancellor of the Exchequer, Rishi Sunak

Posted 4 years ago

Open Letter to the Chancellor of the Exchequer, Rishi Sunak
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The Rt. Hon Rishi Sunak MP

Chancellor of the Exchequer

11 Downing Street



United Kingdom


1 April 2020


The Government must take urgent action to protect jobs and stimulate the economy


Dear Chancellor,   

I am writing on behalf of owner-managers, small limited companies and alternative finance platforms, to urge you to give serious consideration to the following ways in which the government can protect all businesses and stimulate the economy to ensure that no one is forced to suffer the economic fallout of Covid-19 alone.

I am the CEO of NextFin, the online alternative finance aggregator, which receives over 50,000 investors and entrepreneurs to its platform per month.1

On 17th and 25th March respectively, you declared that the government would “stand behind businesses small and large”, introducing measures which include government-backed and guaranteed loans to help firms adversely affected by the lockdown.

For this, I would like to commend you on your efforts to protect businesses. Indeed, as a result of measures such as the Employment Retention Scheme, Coronavirus Business Interruption Loan and the Self-Employed Income Support Scheme, many businesses will now be able to claim support from the government to mitigate the financial impact of the coronavirus.

But while the government’s measures have been described as a “lifeline” for many, the measures simply do not go far enough in supporting small businesses. In the case of small limited companies, many owner-managers are not covered by the Self-Employed Income Support Scheme and it is very difficult for early-stage companies with low profits to qualify for the Coronavirus Business Interruption Loan Scheme (CBILS).

But it is not just small businesses that are at risk. The Peer-to-Peer (P2P) industry is facing a potential crisis of liquidity with retail investors and large funds alike no longer investing. As the markets take yet another hit, private investors are running for the hills jeopardising the future of many small and medium enterprises, while transactions in the equity crowdfunding market are at a historic low. Both industries form a considerable amount of small business funding.


  1. Support small limited companies with a payout of £2500 per month

We have seen that while the government’s support for the self-employed is certainly unprecedented in its scope, it seemingly excludes a key part of the labour market: small limited companies.

Indeed, the scheme does not extend to owner-managers of companies that pay themselves through dividends. According to the Treasury, people who pay themselves through dividends are not included in the scheme because it is difficult to distinguish between those who pay themselves in dividends from self-employment and those who receive dividends through passive investment.

To exclude owner-managers of small limited companies based on the above criteria could be of detriment to the UK economy. As I have reported, there are 2 million small limited companies in the UK, which accounts for 34% of all UK businesses.2

The argument surrounding the eligibility of owner-managers paying themselves using dividends and the assertion that they do not pay into the system highlights the misunderstanding of how small limited companies actually operate. Indeed, small limited companies that employ 1-11 people generate more tax revenues through employers National Insurance contributions, Corporation Tax, VAT and sometimes huge levels of business rates. In most instances, these levels are higher than an individual on PAYE or a self-employed sole trader. Therefore, it is imperative that we save these businesses.

In light of this, and because owner-managers cannot claim the 80% self-employment relief; nor the 80% furlough employment relief, unless they were considering making themselves redundant, we propose that the government pay them a fixed sum £2500 per month, or match the provisions of the Self-Employment scheme based on dividends for directors that are drawing less than £50,000 per year. While we acknowledge this will incur a cost to the Treasury, it is important to note that the cost will be far less than the expense of mass unemployment.


  1. Extending the Coronavirus Business Interruption Loan to all peer-to-peer Lenders

I welcome the news that restrictions are starting to be lifted for P2P lenders applying to the Coronavirus Business Interruption Loan. However, I am concerned that the British Business Bank is not ready to start assessing new lenders wishing to join the Scheme, despite being announced over a week ago.

With £3.5 billion lent per year via alternative finance platforms and thousands of businesses benefitting from funding3, we should be asking ourselves: why in the face of this crisis and with the P2P industry now regulated by the Financial Conduct Authority (FCA), are platforms being ignored and forced to wait?

The reason why the P2P market has expanded so quickly over the last 8 years is because platforms are fast and efficient in their lending processes, utilising the latest financial technology. 

The government needs to recognise that a good way to get money to small businesses quickly is to extend the CBI Loan to all regulated P2P lending sites. In doing so, the government could provide P2P lenders with a guarantee of 80% on each loan to give investors further confidence to invest through P2P platforms, thus giving them capital to lend to small businesses - many of whom rely on these loans to survive.

And with the Bank of England having cut the interest rate to 0.1%, what better way to encourage private investment in enterprise, via P2P platforms, by providing a guarantee that in the event of a default the government will pay 80% to the investor, and in return investors get access to much higher interest rates? There is £60 billion sitting in cash ISAs earning little to no interest at the moment.4


  1. Increase EIS and SEIS allowances to stimulate investment and protect jobs

Many small companies and early-stage businesses will not qualify for the government CBI Loan or any type of loan, simply because they will not be able to repay it. The solution lies in equity funding.

The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) have been responsible for almost £20 billion worth of private investment to create and drive the growth of over 27,000 businesses.5

A way to stimulate billions of pounds in investment would be for the government to temporarily raise the income tax relief credit to 50% for EIS and 70% for SEIS, and also increase SEIS investment threshold to £250,000 and £10 million on the EIS. On SEIS, for example, this could equate to roughly a £150,000 cash injection per business for tens of thousands of early-stage businesses, that otherwise would not be able to afford to repay a loan and face the danger of having to close their doors.

Indeed, equity crowdfunding has gone from raising a cumulative £967.6 million over the last seven years, to suffering nearly a 40% drop in activity in the last week. And this will only increase unless the government takes urgent action. We have seen similar drops in investment from EIS funds.6

With coronavirus posing an unprecedented threat to the economy, I urge the government to consider these alternative policy approaches which will directly increase investment in the economy to avert the potentially detrimental impacts on the hundreds of thousands of small businesses that form the backbone of the UK economy. In particular that EIS will stimulate much needed private investment to aid the economy in its recovery

Yours sincerely,


Sacha Bright, CEO Nextfin










Tagged: News Tax Peer-to-Peer

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