The impact of ‘Plan B’ and the re-introduction of stricter measures to protect against the Omicron Covid-19 variant could derail the UK’s fragile economic recovery and have a devastating and disproportionate effect on SMEs in the North East, a leading restructuring & insolvency (R&I) practitioner is warning.

Following updated government advice, which recommends home working where possible and mandatory face coverings in most public settings, Kerry Pearson, R&I Partner at UK Top 10 accounting firm Azets in the North East, says unclear guidance and an increasing lack of confidence could lead to a catastrophic impact on SMEs, at a time when support measures such as the Job Retention Scheme (JRS) are no longer available.

Kerry Pearson said: “SMEs are the lifeblood of the UK economy with over 5.5 million SMEs operating across the UK, employing over 16 million people and accounting for up to half of the revenue to the UK economy They have a critical part to play in the country’s economic recovery from nearly two years of turmoil. The ability to furlough staff where necessary and access to other support measures that are now closed offered a lifeline to many of these businesses. Without these and little clarity regarding the likelihood of even stricter measures, confidence amongst SMEs is now faltering and businesses are once again feeling exposed.

“The government’s Plan B could have big consequences for the business community – and could be potentially devastating for the hospitality and traditional retail businesses. People who have been told to work from home to stop the spread of the virus might feel uncomfortable socialising and that will further diminish what is normally a critcal period for retail, hospitality, and leisure businesses.”

Kerry does not foresee the re-introduction of schemes such as the JRS, under which a business could claim up to 80% of a furloughed worker’s usual wages, via the payroll, of up to a total of £2,500 each month.

Kerry concluded: “Given the significant amount of money already spent on Covid support measures, such as the Recovery Loan Scheme (RLS) extended into next year, it’s likely the government might well resist bringing back closed schemes. This is bad news for businesses in the North East operating in a stop/start economy, some of which were only just getting back on their feet.

“Typically, it’s businesses who seek advice early that have the best chance of recovering from financial distress, and have more options open to them, with more time to take a decision about their next step.”