Support to non-VAT registered firms, that make up the bulk of new firms created over the last two years in Wales, is being considered by the Welsh Government in its economic response to the Covid-19 pandemic.
Alongside a £1.2bn package of grants and business rate reliefs to firms impacted in the hospitality, retail and tourism sectors — administered by the 22 local authorities — the Welsh Government has its £500m Economic Resilience Fund (ERF).
The fund is providing £400m in grant support to companies, from micro-businesses up to some of the economy’s largest employers.
However, to date firms need to be VAT registered to be eligible, while the £100m loans component of ERF, which is being managed by the Development Bank of Wales, is only for firms trading for at least two years.
Of the 14,000-plus firms created in Wales between 2018 and 2019, only 2,000 were VAT registered.
However, Mr Skates confirmed that the next £100m phase of the ERF would look at supporting non-VAT firms, with the possibility of a bursary scheme similar to a £100m initiative just announced by the Scottish Government.
He also confirmed that work is advanced on a successor fund to the development bank’s £100m Covid loan fund, which could also look to fund start-ups less than two years old.
On the current lack of emergency support for micro-businesses that are not VAT registered he said: “This is a very real concern for us, and all the minds in 海角视频 Treasury, the Welsh Government and other governments, have been determining how best to support such firms.
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“For the second phase of the ERF we are prioritising this particular group and looking how we can support and invest. Largely it is a welfare issue and the Scottish Government has just detailed bursaries that will be administered for such micro-businesses... and that is certainly something we are considering right now.
“Our key concern is obviously avoiding fraud and fraudulent attempts to extract public money from Welsh Government, but equally recognising the severity of the emergency and wanting to make sure that businesses are alive during this period.
“So micro-businesses that are not yet VAT registered will be a key concern of how we spend the £100m second phase of the ERF.”
He said the £100m fund from the Development Bank of Wales received 1,600 applications, when in a normal year the bank would process just 500 loans. The full £100m will be released to those firms that successfully applied for loans of up to £250,000 by the end of the month.
Mr Skates said of the two year trading requirement: “We had to make sure that the most viable business got access to that fund. It is worth saying that 80% of firms that have applied are not customers of the development bank.
“We are also looking at a further phase of that particular fund and tweaking it according to market needs and we are hoping to make an announcement on that in the not too distant future.”
Earlier this week 海角视频 Chancellor Rishi Sunak announced a £1.2bn coronavirus Future Fund for start-ups. However, on funding support it is only available to firms that have raised equity investment of at least £250,000 in the last five years. Those eligible will receive loans that can be converted into equity, ranging for £125,000 to £5m, providing they can match-fund the amount from private investors.
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There are only around 60 firms in Wales which has raised £250,000, mostly in the tech and life sciences sectors, in the last five years.
Mr Skates said while the fund was welcomed, he added that its fundraising criteria would mean start-ups in Wales would currently be disproportionately underfunded.
He added: “I will raise with my counterpart in 海角视频 Government the need to revisit the support, particularly because of the criteria that is being detailed, which I fear could lead to a huge number of Welsh-based start-ups missing out on the support that has been announced.”
Mr Skates has promised that "all good business in Wales in 2019, would be a good in business in 2021.” However, he warned that a recession was inevitable.
He added: “To avert a major depression it is imperative that governments across the 海角视频 do everything in their power to shelter businesses through this storm and protect workers from the very great threat of unemployment. And we are rising to that challenge.”
Local authorities have now released grant funding under the business rates relief scheme to 35,000 businesses, totally £441m, while more than 7,500 applications to the Welsh Government’s ESF have been made. Mr Skates said Business Wales (the Welsh Government’s business support offer), local authorities, and the Development Bank of Wales, were working flat out to support firms.
He said support in Wales represented 2.7% of Welsh GDP. “This is a huge commitment from us and we are reaching one in five Welsh businesses,” added Mr Skates.
However, the Economy Minister said with 255,000 firms in Wales, the Welsh Government couldn’t support of all them. He added: “Yes, there are still gaps and yes there is more we can do, and yes there is more that we will do.”