Following a reintroduction of restrictions to counteract a rise in COVID-19 infections across the UK the Chancellor of the Exchequer has unveiled the Government’s ‘Winter Economy Plan’ to support workers and businesses through a tougher economic climate in the Autumn and Winter.
techUK has welcomed the plan as an important step to support businesses and communities cope with the disruption of the additional social distancing measures.
The Winter Economy Plan sets out a number of interventions:
- a new Job Support Scheme to begin on 1 November the day after the popular CJRS (furlough scheme) ends,
- an extension to the Self-Employed Income Support Scheme (SEISS),
- help for the hospitality and tourism sectors through a continuation of the reduction in VAT,
- support for over 1 million businesses to relieve pressure on their finances and cashflow through an extension to the application period for four government-backed loans schemes (CBILS, BBLS, CLBILS and the Future Fund),
- changes to the terms of repayment for Bounce Back Loans (BBLS) and Coronavirus Business Interruption Loans (CBILS),
- new payment schemes to ease the burden of paying deferred VAT and Self-Assessment tax liabilities.
The job support scheme which is the flagship measure introduced in the Winter Economy plan will be available to employees who are able to work a minimum of 33% of their usual hours.
Eligible employees must work for a Small and Medium-Sized Enterprises (SMEs) or a large business who can demonstrate that their business has been adversely affected by COVID-19.
For every hour not worked the employer and the government will each pay one third of the employee’s usual pay, the government contribution will be capped at £697.92 per month.
Employees using the scheme will receive at least 77% of their pay, where the government contribution has not been capped. Businesses will be reimbursed in arrears for the government contribution.
The Coronavirus Job Support Scheme (CJSS) will run for six months from 1 November 2020 and is open to employers with a UK bank account and a UK PAYE scheme.
techUK members will also welcome the extension of applications for four government-backed loans schemes (CBILS, BBLS, CLBILS and the Future Fund), as well as the changes to the terms of repayment for Bounce Back Loans (BBLS) and Coronavirus Business Interruption Loans (CBILS) and new payment schemes to ease the burden of paying deferred VAT.
The measures on repayments will allow:
- CBILS lenders to extend the term of a loan up to ten years, providing additional flexibility for UK-based SMEs.
- Businesses that borrowed under the BBLS the option to repay their loan over a period of up to ten years. This will reduce their average monthly repayments on the loan by almost half. UK businesses will also have the option to move temporarily to interest-only payments for periods of up to six months, or to pause their repayments entirely for up to six months.
- Businesses which deferred VAT due in March to June 2020 the option to spread their payments over the financial year 2021-2022. Rather than paying in full at the end of March 2021, businesses will be able to choose to make 11 equal instalments over 2021-22.
Cashflow has been a huge concern across the economy, and in the early stages of the crisis quick access to cash through Government schemes was vital to keeping many firms doors open.
As business leaders look towards adapting their business models to cope with medium term impacts of social distancing and the long term economic impacts of COVID-19, financial support and flexibility on repayments will be vital to prevent cashflow and debt repayments problems putting a dampener on the economic recovery.
The adoption of digital technologies has been a key feature of the business response to COVID-19. The ONS BICS survey has shown larger businesses and digitally enabled sectors have performed better over the course of the pandemic, being less likely to have ceased trading or placed large numbers of staff on furlough.
SMEs leaders recognise the benefits digital can bring, a Sage survey of 5,000 SME leaders, showed that 70% of SMEs believe that using digital solutions and technology will play a key role in helping them adjust to the impact of COVID-19.
However, severe, and ongoing cash constraints mean that only a small proportion are actively planning to increase the digitisation of these key processes. Over 60% of businesses were still making a loss in late May, and 50% expected this to continue into Q3 2020 and beyond.
Research by Cisco has shown that digital native businesses have continued growth throughout the pandemic, while increasing the digital capabilities of SMEs could add £155bn to the UK economy.
Therefore as the Government moves forward with its plans for economic recovery and renewal continuing to support businesses on cashflow and offer additional incentives to digital adoption will be foundational to enabling a higher growth more resilient economy.
techUK will continue to engage with Government in the Comprehensive Spending Review and next UK Government Budget to support plans for a digital led recovery.
The full details of the Winter Economy Plan can be found here.