Summer Statement 2020
Today, Chancellor Rishi Sunak announced the latest set of economic measures in the Treasury’s response to the economic impact of COVID-19. The first stage of support for businesses introduced tax cuts and deferrals, grants and government-backed loan schemes, as well as the Coronavirus Job Retention Scheme. These large and comprehensive measures supported more than 11 million people through four challenging months.
By the end of April, our economy had shrunk by 25%. Even though May and June saw retail figures pick up, there is still clearly a lack of consumer demand. Until the public feels comfortable and safe enough, we can’t expect a strong return to newly opened businesses and everyone in their supply chains.
In his latest announcement, Sunak declared that we’re now moving onto the second stage: reopening the economy. These measures are largely in line with rumours that circulated earlier this week about training incentives and boosting specific sectors. Below we go through what the Treasury has promised to businesses with the Job Retention Bonus, KickStart Scheme and VAT cuts, and what they can mean for your business. The emphasis is clearly on protecting, supporting and creating useful jobs against the significant projected losses, which will benefit us all.
A huge issue for many employers has been which staff to bring back from furlough as employer contributions begin to increase next month. The government is acutely aware that extending the scheme forever would be of little help to those on it, and is keen to promote and create viable jobs for the future.
However, to avoid a rush of redundancies in the Autumn, the Treasury has designed the Job Retention Bonus. Job losses and sustained unemployment (over 6 months) is the lasting scar of a recession. In order to incentivise employers to keep on their furloughed staff, they’re offering a £1000 bonus per employee who is kept on continuously until January. The caveat? They must be paid at least £520 a month and at full-time.
To help address youth unemployment, the government is offering to pay employers directly if they create a new, additional job for a 16 – 24-year-old. These jobs need to be paid at least at national minimum wage, which will be covered by the government for 6 months, plus overheads.
The idea behind the scheme is to provide training and support to young people that will help them find a permanent job in the future. They’ve bookmarked £200 million to fund hundreds of thousands of these jobs, and there’s no cap on the number of places available.
Employers will be paid £1000 to take on trainees. The government is tripling its current scheme to make space for more young people and is investing in careers advisors to support over 250,000 people. For businesses that take on apprentices, the government will offer £2000 for each 16 – 24 year old involved, and £1500 for anyone over 25.
These schemes prove extremely effective and useful – 91% of apprentices stay in work or go on to do further training afterwards – so they want to make them as attractive as possible to businesses across the country right now. The positives for businesses are evident: you get paid for training up skilled potential employees.
There will also be a £2 billion ‘Green Homes Grant’. The government wants the UK to make a ‘green’ recovery from the pandemic and is offering vouchers to help people invest in more energy-efficient homes. The scheme will grant up to two-thirds of the cost of renovation and up to £5,000, or 100% of the costs and up to £10,000 for poorer households.
This should be a massive stimulant to the construction industry in particular. Their aim is to support around 140,000 green jobs while helping buildings become greener and cheaper to run in the long-term.
The hospitality, leisure and tourism industries are amongst the hardest hit by Lockdown and coronavirus. While most businesses were allowed to reopen from 4 July, many aren’t able to sustain the costs that reopening would incur.
Targeted, sector-specific support is needed to help save many of these businesses. The biggest operational challenge these industries face is undoubtedly demand. The public is understandably cautious about going out again while the threat of infection is still present. And for many businesses in city centres, without office workers or tourists there just isn’t enough footfall to make opening viable, let alone profitable.
VAT will be cut from 20% to 5% across these industries in the hopes it boost demand. The reduction will come into effect from next Wednesday until January 2021. Hopefully this will be a welcome catalyst to restaurants, pubs, cinemas and the many other attractions in Britain’s hospitality and tourism sectors.
And in August, the ‘Eat Out To Help Out’ scheme will also launch. Any restaurant can opt-in for their customers to receive up to a 50% discount on their meal (up to a £10 discount per head) Monday – Wednesday.
It’s clear that the motive behind these announcements is to reduce the threat of mass unemployment. By focusing on employer rewards for retaining staff and training new, young employees or apprentices, the second stage should offer a few incentives for businesses across the country. Lowering the potential levels of unemployment is crucial to boosting the UK economy and avoiding a more painful recession. This will undoubtedly serve all of us in the long run.
Everything the government has done until now has been to freeze jobs in existence at the beginning of crisis. Consumer preferences before coronavirus may not align with future demand. Training and adapting your team to help your business grow in the best direction for the post-pandemic world should be your main priority. Definitely consider how you could use the KickStart scheme to boost your business and help the economy.
For more updates on the current situation and advice on how your business can use government schemes, head to our COVID-19 Impact Support Hub.