A roundup of Rishi Sunak’s latest economic support measures
Millions of people have come off the furlough scheme and back into work as the UK economy reopened over recent months. However, new cases of COVID-19 have had a resurgence that threatens our economic recovery. Yesterday, Rishi Sunak announced the Treasury’s latest set of measures to support businesses and workers in response to this growing threat.
Government-backed loan repayments are being extended, there’s a replacement for the furlough scheme and VAT relief for all. We go into detail about how these measures can help your business below.
The government’s state-backed loan schemes, such as CBILS, are being extended until the end of 2020, and there’s talk of a new guaranteed loan programme that will begin in January. It’s not clear exactly what that will look like, but we’ll be the first to tell you all about it.
To clarify, businesses will now have until 30 November to apply for funding through the Coronavirus Business Interruption Loan Scheme. Accredited lenders, like MarketFinance, will then have until the end of December to process those applications.This extension ensures that businesses not only have more time to apply, but lenders have more time to ensure that every application receives the necessary attention.
Sunak wants to help companies repay government-backed business loans in his new “pay as you grow” scheme. Currently, these loans are interest-free for the first 12 months, repayable over six years. This has now been extended to ten years, which means your repayments can effectively halve.
Interest-only payments can also be made and any business in “real trouble” may be able to suspend their payouts. If you haven’t looked into the government’s coronavirus loans and grants yet, you just got a bit longer to do so.
We offer revolving credit facilities up to £5 million as well as loans up to £150,000 through the CBILS and are thrilled to have more time to help even more businesses with funding to last them long into the future. Our guide to applying for CBILS funding will walk you through the process step-by-step.
The Treasury has promised an extension of the 5% VAT rate brought in for the hospitality industry earlier this summer, now lasting until the end of March instead of 13 January. And all businesses are allowed to spread their VAT bills across 11 payments over 2021-2022 (another part of “pay as you grow”).
The Treasury’s furlough scheme has been a lifesaver for many employers around the country. The latest Coronavirus Job Retention Scheme figures until August reported that 9.6 million jobs had been supported through the programme, with claims made by 1.16 million employers. Yesterday, we learnt that a new job support scheme will replace furlough when it winds down at the end of October.
The aim of this scheme is focused on supporting viable jobs while not keeping people in ‘zombie’ roles that won’t be there after we emerge from the crisis. Businesses can choose to keep employees in their job on reduced hours instead of making them redundant. It also avoids forcing a massive pay cut that an employee may not be able to afford to take. If you don’t have quite enough work for furloughed employees to come back full time, this scheme may help fund their part-time work for you.
Lasting for six months from November, workers on the new Job Support Scheme must work at least a third of their regular hours, which the employer must pay at their normal rates. When they aren’t working, the government has pledged to cover a third of their usual rate for that time, with the employer paying another third.
Broken down it means employers pay 55% of these workers’ wages for them to work a third of their hours, with the government contributing a further 22%. Employers can therefore move workers onto reduced hours without having to cut their wages or risking losing the employee entirely.
It’s much less generous than the existing scheme: in October, employers supporting furloughed workers who are still not working part-time are paying just 20% of wages. However, by supporting only jobs that can have enough work for an employee to clock at least one third of their hours, the government is subsidising jobs that they consider more likely to be sustained once the pandemic ends.
The Treasury is specifically targeting SMEs here – larger companies can only make use of the scheme if their turnover has fallen by a third. You can also claim the Job Retention Bonus for anyone moved onto the Job Support Scheme (£1000 per previously furloughed employee who is still employed by you at the end of January 2021).
The support measures may not be as generous as they were at the beginning of the pandemic, but they do go further to support struggling businesses into the winter months. However, if the 10pm curfew doesn’t work to lower infection rates then there is a chance of a new lockdown or at least stricter restrictions. The Treasury will need to figure out what else it can do to support affected businesses, should this happen.
These measures will help employers keep certain employees in work, and having extra time to pay government-backed loans will be a huge relief to many. If you’re interested in benefiting from CBILS funding then you can find out more here.