Economic packages for Coronavirus are changing in the UK. Government guidance has been updated on a daily basis, as the virus ebbs and flows. Rishi Sunak, Chancellor of the Exchequer, has had his hands full in trying to navigate an endangered economy through a truly unprecedented situation.
Amidst it all, SME funding has been set up to stop the whole ship from sinking. Whether the UK sinks or swims, however, remains to be seen.
Early Stage Economic Responses to Covid-19 in the UK
At the onset of the virus Rishi Sunak introduced a range of measures to keep cash flowing through companies during the pandemic. One of the biggest government pay-outs in peacetime history was the Furlough Scheme. While this originally saw the government paying 80% of an employee’s salary as part of an extensive job retention program, the recent changes have seen this figure drop to 2/3 of employee’s salary.
The Chancellor of the Exchequer has also been the mastermind behind other measures, all designed to keep cashflow moving during these difficult economic times. The “Eat Out To Help Out” campaign was an exemplary method by which the UK government managed to largely save the hospitality sector. During the month of September, citizens dined out while the government footed some of the bill. A ‘£10 Rishi dishi’ as the scheme affectionately became known.
CBILS
The government were quick setup alternative finance streams for small businesses. The Coronavirus Business Interruption Loan Scheme (CBILS) has provided financial support up to £5 million, with the government guarantees 80% of the finance and the business pays interest only after the first year has passed. The CBILS scheme has been a lifeline for thousands of small business owners around the country. The deadline for CBILS has been extended to the end of November. If your business needs funding on the government CBILS scheme, get in contact with one of our brokers here.
The Winter Economy Plan
On Thursday, 24th September 2020, the Chancellor announced an upcoming “Winter Economy Plan”. This document outlines exactly how the government plans to tackle the economic struggles winter will bring. The range of measures unveiled to stave off the threat of mass unemployment includes a new Job Support Scheme which will contribute to some worker’s wages from November.
Job Support Scheme and the Self Employment Scheme
The new Job Support Scheme promises to cover up to 22% of worker pay for six months, an extension to the current Self-Employment Income Support Scheme and loan schemes and VAT and self-assessment deferrals.
The government will continue to top up the wages of people working. In particular, help will be given to workers forced to reduce hours due to the pandemic. If an employee works reduced hours the employer pays for that, and in addition, the employer and government pay one-third of the lost pay. So, for someone on £2,000 a month working 50% hours, they would get £1,000 normal pay plus £333 from their employer and from the government.
The chancellor is extending the self-employed grant on similar terms to the Job Support Scheme. A grant will be available to those eligible for the Self Employment Income Support Scheme Grant. The grant will cover three months’ worth of profits for the period from November to the end of January. It will cover 20% of average monthly profits up to a total of £1,875.
In terms of taxes, a 15% emergency VAT cut for the tourism and hospitality industries will be extended from January 2021 to 31st March. Businesses who deferred their VAT bills will be able to pay back their taxes in 11 smaller interest-free instalments.
The Kickstart Scheme
Furthermore, The Kickstart Scheme provides funding to create new job placements for 16-24-year-olds who are at risk of long-term unemployment. The scheme reimburses the employers for the first 6 months of wages. A new traineeship program will also encourage employers to take on apprentices, via monetary rewards. The Kickstart Scheme provides funding to create new job placements for 16 to 24-year-olds on Universal Credit who are at risk of long-term unemployment. This scheme helps to put the young at the heart of the revival of our economy, as well as creating a brighter future for a new generation.
The government are doing what they can to keep our economy afloat, and at the centre of this is their support for businesses. We can expect further updates as the nights shorten, but for now, it seems, there is a mid-pandemic peace on the economic front.
