BRITISH capitalism enters 2022 with experts and business owners predicting a massive surge in bankruptcies amongst SMEs (small to medium sized enterprises with no more than 500 employees) as they are overwhelmed by the demand to repay the government-backed loans that kept them alive during the pandemic lockdowns.
In 2020, the Tories brought in ‘bounce back’ loans and the Coronavirus Business Interruption Loan Scheme (CBILS) to prop up businesses through the Covid pandemic.
These schemes ended in March last year, and now companies are faced with paying back the massive debts they have taken on.
When these schemes were launched, the Tories assured everyone that Covid was purely a temporary hiccup in the smooth running of capitalism and that ‘normal service’ would soon be resumed and the profits rolling in again enabling all this debt to be repaid.
There has been no ‘bounce back’ for UK capitalism. On the contrary, the economy has bounced over the cliff of recession and inflation.
Far from growing, even official figures show that the British economy is 0.5% smaller than it was prior to the pandemic. At the same time inflation has soared.
In all, it is estimated that government-backed loans totalled about £80 billion with SMEs taking on over £46 billion of extra debt.
Since March 2021 only £5 billion of this debt has been repaid, leaving the majority of SMEs facing bankruptcy as repayments become due following the end of the one year grace period allowed by the Tories.
One owner of a small business, facing repayments of £1,100 a month from income that has been devastated by reduced revenues to her car cleaning business, described the situation to the Telegraph as ‘looking down the barrel now’.
Hundreds of thousands of other companies are looking down the same barrel of bankruptcy especially since the pause on winding up and bankruptcy orders was ended in September. This will be followed in March by the ending of the moratorium on evicting commercial tenants for rent arrears.
Judith Palmer from the insolvency specialist Begbies Traynor told the Telegraph that there had been an increase in the ‘signs of distress’ among these SMEs since the courts reopened and creditors started to take action for debt repayments.
She identified 800,000 companies at risk of insolvency with inflation representing the main threat as it drives up business costs along with commercial rent arrears which, according to the consultancy Remit, totalled £7.4 billion from the start of the pandemic up to the end of 2021.
SMEs in Britain number 5.6 million businesses employing 16.3 million people – 61% of the total employment in the country.
The collapse of this sector will throw millions out of work overnight and facing extreme poverty, as the inflationary crisis that is destroying these SMEs is also destroying the living standards of every worker and young person in the country.
According to the government inflation figures calculated by the Consumer Price Index (CPI) inflation is running at 5.1% and growing.
In fact, as every family knows, this is not the true measure of inflation as energy prices will surge by 50% this year with warnings that households are going to be hit with ‘seismic’ increases to their bills, and consumer expert Martin Lewis predicting people will be forced to choose whether to ‘heat or eat’.
The working class is staring down the same barrel as these small and medium sized businesses.
Directly ahead, as the bosses’ crisis intensifies, is a massive eruption in the class struggle as workers rise up against being driven into poverty by a capitalist system that is completely bankrupt and fit only for the dustbin of history.
The only solution for the working class is to bring down this Tory government and bring in a workers’ government and a planned socialist economy.
The TUC is permanently on its knees in front of the bosses and their government and is incapable of leading this struggle. A new revolutionary leadership must be urgently built in the working class prepared to lead the struggle to overthrow this bankrupt capitalist system and advance to socialism.
Only the WRP is building the leadership necessary. Join today.