Company directors excluded from government financial support during the pandemic could be thrown a lifeline if new proposals are adopted by the Treasury.

A record number of small businesses in the UK are forecast to close this year, according to the Federation of Small Businesses. The organisation said the government needs to provide further assistance to small businesses to help them cope with the impact of the pandemic, or a quarter of a million firms could be forced to close.

One of the proposals put forward by the FSB is a support scheme to help those self-employed workers currently excluded from state aid. I’ll come on to talk about that proposal in a minute, and why it could represent a lifeline for company directors, currently excluded from government financial support.

Based on a survey of 1,400 small businesses, the FSB found that 5% expected to close this year. These survey results were then extrapolated to reach the forecast of 250,000 SMEs lost this year.

There are around 5.9 million small businesses in the UK. Losing a quarter of a million of them would be a tragedy, as it has an impact not only on the small business owners, but their families, their staff and their families, suppliers and the local economy.

Mike Cherry, who is FSB national chairman, said:

“The development of business support measures has not kept pace with intensifying restrictions. “As a result, we risk losing hundreds of thousands of great, ultimately viable small businesses this year, at huge cost to local communities and individual livelihoods.”

He criticised the government for addressing small businesses challenges created by the latest national lockdown “with a whimper”, and called on support for businesses beyond the retail, leisure and hospitality sectors, and added:

“Company directors, the newly self-employed, those in supply chains and those without commercial premises are still being left out in the cold.”

The FSB is also worried about small company directors, who are paid via a dividend instead of a salary, who do not currently receive any support from the government. According to the FSB, this lack of government support applies to between 700,000 and 1.1 million company directors.

The proposal put forward by the FSB, a Directors Income Support Scheme, would pay grants of up to £7,500 to cover three months of lost dividend income.

The scheme would be limited to those drawing dividends of less than £50,000 a year. After submitting proposals to the Treasury, the FSB is expecting a decision this month.

According to the Treasury, there are no additional support schemes planned at the moment, but they added:

“Our support schemes are designed to get help to those who need it most whilst protecting the taxpayer from fraud, but of course we keep everything under review and are always open to further ideas.”

Could we see a Directors Income Support Scheme along these lines? I think we might.

We’re about to hear from Labour leader Sir Keir Starmer, who is going to be calling on the government to “protect family incomes” as it addresses the ongoing economic impact of the pandemic. One of the measures Sir Keir will call for is for teachers, members of the armed forces and care workers to be excluded from the public sector pay freeze. He’s also going to demand the government doesn’t end the temporary £20 a week boost to Universal Credit. That’s due to finish in April.

In his speech, Sir Keir will apparently say that government ministers must “protect family incomes and support businesses” from the economic impact of not only the current lockdown but also from previous restrictions. He’s going to say that government policies must “make a real difference to millions of people across the country” and “put families at the heart of our recovery”.

Sir Keir also wants the government to suspend the planned 5% increase to council tax in England this April, and to extend the current ban on evictions and repossessions.

Responding to the calls from Labour, Conservative party co-chairman Amanda Milling has said these are actions already taken by the government, saying:

“We have delivered an unprecedented £280bn package of support to protect jobs, livelihoods and public services through this pandemic,”

That package of financial support includes the furlough scheme, temporary increase to Universal Credit payments, and additional funding for local authorities.

She added: “The Conservatives will continue to put families and communities at the heart of every decision we take as we deliver on our promises to the British people,”

Watch this space. I would be very surprised if we don’t hear more from the Chancellor, especially if, as many expect, lockdown measures become stricter in the coming days, in an effort to put a lid on rising coronavirus cases and the extreme pressure being placed on the NHS.

What additional measures do you think Chancellor Rishi Sunak needs to announce in order to secure the future of so many small businesses, and sweep up those currently facing financial difficulties due to the pandemic, but excluded from support schemes?