More than 10,000 small businesses in England are missing out on government grants to mitigate the impact of the coronavirus lockdown because they are based in shared offices.
The findings from a study by Colliers International, a commercial estate agency, highlights a gap in a key element of the emergency rescue package for smaller companies rolled out by chancellor Rishi Sunak since mid-March.
The government made available £12.3bn in small business grants, with a payout of £10,000 available to businesses operating out of premises that have a ratable value — a measure of the rental value of the property — up to a maximum of £15,000.
Companies in the retail, leisure and hospitality sectors with a ratable value of between £15,000 and £51,000 can apply for a £25,000 grant.
But the decision to base eligibility solely on that one measure has excluded thousands of businesses that use managed offices from the scheme. The regular reconfiguration of workspace in buildings, managed by companies such as WeWork and IWG, means individual units often do not have a ratable value assigned by government’s Valuation Office Agency.
The study estimated this has left 10,000 small businesses excluded from the grant.
Alessandra Lee, who runs a recruitment business from one of IWG’s shared offices in Manchester, has been shut out of the scheme. “The floor we’re on was all one floor until last year, but they’ve carved it up and now those offices don’t have ratable values, so can’t get the grant,” she said.
“As it stands I’ve probably got three months in me. That £10,000 is massive, not just for my business but for all those around me,” said Ms Lee. “It’s heartbreaking. Small businesses are going to drown in this.”
The majority of businesses missing out on the grant are in the bigger cities where flexible workspace is most common. There are 3,250 such companies in Westminster, the City of London and Camden alone, according to Colliers.
Small businesses in the larger cities operating from their own premises are also losing out because the higher rents push ratable values out of the grant bracket.
This is reflected in the data that shows that of all the English local authorities Cornwall county council has the highest number of businesses eligible for the grant — almost 24,000.
This compares with just over 19,000 in Birmingham and 115,000 across all of London’s 33 local authorities, an average of just under 3,500 per borough.
“If there was ever evidence that more small businesses in London are falling between the cracks in the process of grant allocations — this is it,” said John Webber, head of business rates at Colliers.
Even eligible businesses are struggling, as they wait for grants which have not yet been allocated. Government figures show that councils had handed out £7.6bn, or 62 per cent of the total due, by April 27. Almost 345,000 out of the 960,000 eligible companies are still waiting, while their cash reserves dwindle.
James Jamieson, chairman of the Local Government Association, said some councils had been overwhelmed administering the scheme. “Councils have been redeploying staff, they have been working seven days a week, doing overtime.”
Clive Betts, MP for Sheffield South East and chairman of the Commons communities and local government committee, said Whitehall’s bureaucracy had not helped. “Since the scheme came in, central government has changed the guidance 13 times with little consultation with local authorities,” he revealed this week.
In a statement, the government said that companies that were not eligible for the grants were “able to benefit from the wide-ranging multibillion pound package of support” it has made available.