On Thursday 24 September – in place of the cancelled budget – The Chancellor of the Exchequer took to the Houses of Parliament to deliver the government’s new business support plan.
The ‘Winter Economy Plan’ outlined a package of measures which include a replacement to the furlough scheme, an extension to the Self Employment Income Support Scheme (SEISS) as well as updates to VAT payments and to the current government-backed loans.
During this announcement, Rishi Sunak stated:
“Our approach to the next phase of support must be different to that which came before.
The primary goal of our economic policy remains unchanged – to support people’s jobs – but the way we achieve that must evolve.”
The package of measure includes three key areas of support, which are:
Support for workers
With the end of the furlough scheme fast approaching, the Chancellor announced a new Job Support Scheme which would be introduced from 1 November. Under the scheme, which will run for 6-months, the government will contribute towards the wages of employees who are working reduced hours.
The scheme will be open to all businesses – even those who had not previously used the furlough scheme – and will see employers continue to pay the wages of staff for the hours they work. For the hours not worked, the government and the employer will each pay one third of their equivalent salary.
In a further attempt to support the UK workforce, it was also announced that there would be an extension SEISS, with self-employed workers now being offered a grant worth 20 per cent of their average monthly profits for the period of November 2020 to January 2021, up to a total £1,875.
Flexibility for loan repayments
For the more than 1.2 million UK businesses who have taken out a government-backed loan, this new measure will provide a more flexible repayment system. For those who have used either the Bounce Back Loan scheme or the Coronavirus Business Interruption Loan Scheme, the length of the loan has now been extended from six years to ten to reduce the monthly repayments cost.
In addition, the deadline to apply for both of these schemes has now been extended with businesses able to apply for a loan until the end of November 2020.
VAT Cuts and deferrals
To provide extra support to the worst-hit industries, the government announced it will extend the temporary 15% VAT cut for the tourism and hospitality sectors until the end of March next year.
On top of this, businesses that deferred their VAT bills will have access to a new payment scheme, which gives them the option to pay it back in smaller instalments rather than in one lump sum.
Will this support be enough?
Following the announcement, many have questioned if this support will be enough to keep the worst-hit businesses afloat. For businesses that cannot reopen, such as nightclubs or
those that have been significantly impacted, the new Job Support Scheme will provide little support and the end of the furlough scheme could be a cliff-edge and bring a wave of redundancies.
In addition, a recent survey conducted by Market Finance found that the small businesses had an average of just over £9,000 left from any Bounce Back Loan they had taken out, with the majority sating that they expected what’s left of the cash to run out by the end of September.
With new restrictions being brought in and local lockdowns being imposed, many SME owners fear that they’ll be facing a challenging winter. In fact, the same survey found that more than half (56 per cent) of businesses believed that seasonal demand during Christmas would be lower than last year.
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