Rishi’s rescue plan eases pressure on businesses

Chancellor Rishi Sunak

On the day that the NHS launched its new test and trace app (have you downloaded it yet?),  and after cancelling the budget, the Chancellor of the Exchequer put forward his economic plan today to protect jobs and the economy over the winter period, which he hopes will balance managing the virus and protecting the jobs and livelihoods of millions.

We analyse the Chancellor’s statement, and responses from across industry can be read at the end of this news story.

Since March the UK government has provided £190 billion of support for people, businesses and public services, much of it in knee-jerk responses to pleas from various sectors (while, in truth, overlooking others entirely – yes the events industry, we really do feel your desperation), but with Boris telling the nation on Tuesday that we might have to live with restrictions to our lives because of the virus for the next six months, a different approach is needed.

Despite calls to keep it, Rishi Sunak is ending the furlough scheme, citing the fact that there is no point in holding people in jobs that now only exist inside furlough.

While businesses have reopened and are operating safely and viably, he acknowledged that they face uncertainty and reduced demand over the winter months.

So he is launching a new Jobs Support Scheme. The government will directly support the wages of people in work, giving businesses who face depressed demand the option of keeping employees in a job on shorter hours rather than making them redundant.

Employees must work at least a third of their normal hours and be paid for that work, as normal, by their employer. The government, together with employers, will then increase those people’s wages covering two-thirds of the pay they have lost by reducing their working hours.

All small and medium sized businesses are eligible, but for larger businesses it will only come into play only when their turnover has fallen through the crisis.

The scheme will run for six months starting in November.

And employers retaining furloughed staff on shorter hours can claim both the Jobs Support Scheme and the Jobs Retention Bonus.

The existing self-employed grant is being extended on similar terms and conditions as the new Jobs Support Scheme.

The Chancellor’st Bounce Back Loans have given more than a million small businesses a £38 billion boost to survive this pandemic.

He has now agreed that these loans can now be extended from six to ten years – nearly halving the average monthly repayment.

For the more than 60,000 Small and Medium sized businesses which have now taken out Coronavirus Business Interruption Loans, the government will guarantee these loans for up to ten years, making it easier for lenders to give people more time to repay.

And he said that he is working on a new, successor loan programme, set to begin in January.

Those with VAT bills hanging over their heads also had reason to be more cheerful. Nearly half a million businesses deferred more than £30 billion of VAT this year, for which payments fall due in March.

The Chancellor announced that businesses can now spread that VAT bill over 11 smaller repayments, with no interest to pay.

And any of the millions of self-assessed income taxpayers who need extra help, can also now extend their outstanding tax bill over 12 months from next January.

He also highlighted two of the most affected sectors: hospitality and tourism, and said he will keep the lower five per cent VAT rate until March 31st next year.

 

Responses from across industry to Rishi Sunak’s announcements:

louise bennettBusiness leaders in Coventry and Warwickshire have praised the Chancellor’s latest round of support measures in the evolving Coronavirus crisis.

Louise Bennett, chief executive of the Coventry and Warwickshire Chamber of Commerce, said: “The crisis has evolved over the past six months and it’s welcome that the Government support for the economy has recognised this and has evolved too.

“Six months ago, most of us were being effectively told to lock the doors on our businesses and it was only those who could work from home that could continue to operate in any real capacity.

“Now, we face a different approach where many businesses are now back and the Government has made it clear that those in manufacturing and construction, for example, should continue to operate providing it is in a Covid-19 compliant way.

“Therefore, this new raft of measures serves to help save as many jobs as possible where business demand has decreased due to the crisis, and recognises that cashflow still remains a major issue for firms – even those who are operating again.

“Some of the measures are of a direct result of feedback Chambers have had from members and have been put forward by colleagues at the British Chambers of Commerce to Government, so it is great to see the voice of business being heard.

“I am very keen to see how easy it will be to access the new support and, also, how those larger businesses will have to demonstrate their eligibility.

“There are also still sectors that are still some way off being able to return, particularly those in business events and conferences and, just as he did at the start of the crisis, we’d urge the Chancellor to look at developing the support for business over the coming weeks and months.”

 

Business West Policy Manager Claire Ralph said: “Business will welcome the Government’s latest intervention to stave off mass unemployment within the South West region, but will no doubt be concerned about the limits to extended support.

“Most notably, the Job Support Scheme, is considerably less generous than its predecessor, given that employers will pay at least 55% of employees’ salaries from 1 November.

“The Chancellor has opened this up to all sectors, rather than offering the more tailored support for those which have disproportionately affected that many including Business West have been calling for.

“This is a concern given aerospace, the night-time economy and cultural and heritage industries contribute so much economic output and provide hundreds of thousands of jobs to our region. The Chancellor isn’t attempting to target support to where it is most likely to be needed.

“Extensions to the Self Employment scheme and the government backed loan schemes are welcome to assist cash flow for struggling businesses, and longer repayment terms for loans and tax deferrals could be critical to prevent insolvencies in those with the fewest reserves to cope over the winter.

“Overall the scale of today’s announcement was very much smaller than those made in July and March, but is overdue and we hope it will help some employers and businesses make it through to Spring 2021.”

 

Nick Abell, chair of the Coventry and Warwickshire Local Enterprise Partnership (CWLEP), said: “We welcome the new range of measures which the Chancellor has introduced which will help employees of businesses in all sectors as well as reduce the expected high numbers of redundancies.

“The number of firms in Coventry and Warwickshire which have received support from the Coronavirus Business Interruption Loan Scheme and Bounce Back Loan Scheme which the Government had already introduced highlighted the need for this kind of support and it is good news these have been extended until the end of the year to enable even more companies in our area to benefit.

“Although the extension of the VAT reduction until March is welcomed particularly by the hospitality and leisure sector, this needs to be looked at in conjunction with the threat to remove the UK as a tax-free shopping destination from December 31 this year which is a major draw to attract international visitors.

“Throughout Covid-19, the CWLEP has worked closely with business support organisations, our local authorities, and district and borough councils throughout Coventry and Warwickshire to provide the information and help businesses need to access these schemes, and that will continue.

“This is a time when businesses need to adopt new practices and new ways of working and this kind of support will help them to lay the foundations for their recovery as we re-build the economy.”

 

British Chamber of Commerce Director General, Adam Marshall, said: “The measures announced by the Chancellor will give business and the economy an important shot in the arm. Chambers of Commerce have consistently called for a new generation of support to help protect livelihoods and ease the cash pressures faced by firms as they head into a challenging and uncertain winter.

“The Chancellor has responded to our concerns with substantial steps that will help companies preserve jobs and navigate through the coming months. The new Jobs Support Scheme will help many companies hold on to valued, skilled employees. Businesses will be eager to see the detail and consider whether and how they will be able to use the scheme.

The Chancellor has listened to our consistent calls for an extension of business lending schemes, more flexible repayment terms for loans, and tax forbearance measures. With almost 40% of our firms saying they have 3 months cash in reserve or less, this will lessen the immediate pressure and provide reassurance for many affected firms at a challenging time.

The Chancellor must remain open to taking additional action to support parts of the economy facing unprecedented challenges over the months ahead. Chambers of Commerce across the UK will continue to work with government to ensure the benefits of these schemes are delivered to firms on the ground.”

Stephen Kelly, Chair of Tech Nation: “We welcome Rishi Sunak’s proactive and far-reaching programme of support for jobs and businesses to navigate the Covid-19 demand shockwaves. It signals a shift in gears by the Government towards targeted investment and a sustainable strategy and vision for Britain’s future.”

“The new Job Support Scheme backs the growth of industries that are key to driving forward the new economy and providing more valuable jobs, growth and prosperity for the future. The Tech sector is at the heart of Britain’s future. In the two years before Covid-19, jobs across the digital tech sector increased by 40% and the industry now employs three million people, accounting for almost 10% of the UK’s workforce and contributing £186bn to the economy. Pre-Covid-19, the tech sector was growing six times faster than the rest of the economy. The UK has embraced digital to manage through the crisis.

“The tech sector plays a critical role in the UK’s future, and the Government’s funding measures announced today demonstrate their commitment to accelerating this new economy with Digital at the heart of its Vision for Britain.”

 

Shakespeare’s England Helen PetersHelen Peters, Chief Executive for Shakespeare’s England, the Destination Management Organisation for South Warwickshire, said the announcement made by the Chancellor of the Exchequer about the jobs support scheme and cancelling the VAT rate increase indicates that the Government is aware of the challenges so many are still facing, but does not go far enough in recognising specific issues facing the tourism and hospitality industries.

“These measures of the new job support scheme and cancelling the planned increase in VAT are welcomed but even with the government help many businesses will struggle to pay staff, where their revenues have been so drastically diminished and little likelihood of these increasing until well into 2021.

“Although the extension of the VAT reduction until March is welcomed, this is still only something that the Tourism Industry had been asking for since the credit crunch, and needs to be looked at in conjunction with the threat to remove the UK as a Tax Free shopping destination from December 31, 2020.  Tax free shopping is a major draw to attract international visitors.

“Every country in Europe and most major tourist destinations worldwide, offer tax free shopping as we know it is a major incentive for international travel. Britain would become the only country in Europe not to offer tax free shopping, putting the UK at a major competitive disadvantage, just at the time that we will be needing to do everything possible to welcome back International Visitors.

“In 2018 International Tourists spent £22bn, VAT was only reclaimed on £2.5bn of this, the remaining £22bn accrued VAT for the treasury to the tune of £4bn.

“With the UK being less attractive to international visitors, there will be an inevitable fall in visitor numbers, and a reduction in spending in all other areas of the visitor economy, hotels, travel, restaurants, theatres, culture and heritage sites and attractions, which will further damage these businesses as well as reducing HMRC VAT income. The Chancellor seems to be giving with one hand and taking with the other.”

 

Simon Warne, partner at accountants Crowe, said: “The additional breathing space provided by the extension of certain schemes and the deferral of payments is likely to be welcomed by those whose business have been most affected and are struggling. For many, the hope is that this will provide the lifeline needed for resiliency-building as economic conditions worsen.

The declining level of SEISS support will reduce incentives for rumoured abuse which was an unwelcome feature of the earlier schemes and which HMRC will be keen to stop.”