By Scott Wright

BANKS and Her Majesty’s Revenue & Customs (HMRC) have been urged to show leeway to businesses which will sustain a short-term hit to cash flows because of coronavirus.

As fears grow over the impact the virus will potentially have on the economy, a group representing small firms in Scotland declared it is important that “fundamentally-strong” businesses are protected from failure.

Colin Borland, head of devolved nations at the Federation of Small Businesses, said that banks and the tax authority should show “common sense” in dealing with firms affected by any downturn in trading which can be linked directly to disruption caused by the virus. Mr Borland suggested that HMRC should not crack down on firms which are a “couple of days late” with quarterly VAT returns, and called for banks to briefly extend overdrafts in such circumstances.

He told The Herald: “These are fundamentally sound businesses who are experiencing temporary difficulties. We really can’t lose them because of a short-term cash flow blip.”

The potential for sharp falls in business revenues was underlined by Paul Waterson, spokesman for the Scottish Licensed Trade Association and owner of The Golden Lion Hotel in Stirling.

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Mr Waterson said his hotel has thousands of bookings in place for lunches and rooms for the coming months which are in limbo while Scotland waits to see what the full effect of the virus will be. Many of the bookings have been made by tourists due to travel from Italy, where flights in and out of the country area already being cancelled.

The situation facing his hotel is replicated across the Scottish tourism industry.

With so few cases of coronavirus in Scotland at this stage, Mr Waterson said he does not feel that sending staff who show signs of a cold home is currently the right course of action. He said: “There is no right or wrong way [to handle it]. We are in the lap of the Gods. It is unprecedented. If someone has been in an [affected] area … you have to show common sense.”

As well as pointing to the official scientific advice from the UK and Scottish Governments, the FSB is encouraging its members to check their insurance policies to ensure they have business interruption cover. This should include an extension for notifiable diseases to cover any losses arising from coronavirus.

The Confederation of British Industry (CBI) in Scotland is urging the UK Government to take action to support employees and businesses on sick pay. It wants statutory sick pay (SSP) to be extended to all workers who self-isolate in line with public health guidance, and to remove the need for employees to earn more than £118 a week before they qualify for SSP, which it said is unfair to part-time workers.

CBI Scotland also called for emergency relief to be brought in for businesses should the total cost of sick pay become unsustainable.

Economist Jeremy Peat, visiting professor of the University of Strathclyde, said the threat posed to the economy from the coronavirus would justify the Treasury taking steps to loosen fiscal policy at the Budget next week.

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Mr Peat noted that the ramifications for the global economy from the virus are huge given the extensive involvement of China in international trade and investment. And he said there is a case to be made for the UK Government to provide relief to firms which could see supply chain costs rise.

Mr Peat: “We have seen in the United States they have already cut interest rates. I suspect we could see a reduction in interest rates from the Bank of England early, but they have only got a limited amount of slack to deploy. It all makes substantial justification for a very loose fiscal policy in the coming Budget to allow a bigger deficit, if only for the coronavirus. I think it is almost justified at any rate to deal with the slowing economy and the potential impact of Brexit. I think support for businesses is a priority over tax cuts at this stage.”

Ewan MacDonald-Russell of the Scottish Retail Consortium said retailers were well-versed in managing supply chains, noting that retail sales can rebound swiftly following short-term downturns, as often happens after extreme weather. So far only anti-bacterial handwash products are showing sales patterns which are out of the ordinary.

Liz Cameron, chief executive of the Scottish of Chambers of Commerce, said: “We would urge business, employers and employees to be cautious and keep themselves regularly up-to-date on the latest advice and guidelines issued by government and the NHS. As a priority, employers should consider reviewing their working practices and insurances so that they are in line with these as they are updated and so they can keep doing business where possible.

Mr Borland said it was important to remain calm. “We have to be clear that it is serious and it is real, but at the same time there are fears that panic and an over-reaction it could do serious damage.”