The disruption caused by coronavirus is being felt in almost every sector of the UK economy, with the Government earlier this month unveiling an unprecedented £330bn package to support businesses through the epidemic.
Chancellor Rishi Sunak said the Government would do “whatever it takes” to fight the economic shockwaves of coronavirus, with a raft of “direct support” measures including tax cuts and millions in grants and loans.
What support has the Government announced?
In his first Budget in March, Mr Sunak announced a £30bn package of support. He later followed this up with an even bigger lifeline by pledging £330bn worth of guarantees to help businesses survive the coronavirus crisis. That is equivalent to 15pc of the value of the economy.
He has since gone further to ensure firms survive the financial hit from the epidemic. Set out below are the actions the Government has taken to support businesses and their employees through this torrid time.
Most of these measures are specific to businesses in England. Different financial support packages are available in Wales, Scotland and Northern Ireland.
Small and medium-sized businesses
SMEs that need cash to pay rent, suppliers or staff, or to purchase stock, will have access to government-backed guaranteed loans at “attractive rates”.
Companies with a turnover of up to £45m will be able to borrow as much as £5m – up from the initial £1.2m that was announced in the Budget – for a maximum term of six years, with no interest due in the first 12 months.
Some 80pc of the total value of the loan will be backed by the Exchequer, which is designed to give banks more confidence to lend to small businesses, even under riskier circumstances.
Businesses can apply via any of the 40 participating lenders, which are listed on the British Business Bank website.
Companies with a higher turnover can tap into a new lending facility provided by the Bank of England. Its Covid Corporate Financing Facility is designed to support liquidity among larger firms, helping them to bridge coronavirus disruption to their cash flows through the purchase of short-term debt in the form of commercial paper.
The scheme is open to firms that can demonstrate that they were in sound financial health prior to the impact of Covid-19.
The scheme, which will last at least 12 months, will be done on terms close to those “prevailing in markets in the period before the Covid-19 economic shock”, the Bank said.
Anyone in between
Thousands of businesses, including many high street names, may find they fall in between the two loan schemes and therefore are not eligible for support. They are too large for the SME loan scheme, but also cannot take advantage of the large company scheme because they do not have a credit rating from a ratings agency that allows them to issue publicly traded debt.
Charles Smith, chairman of high street chain Shoe Zone, complained that because of state aid rules, which cap the overall Government grants a business can receive at a total of €800,000, the £25,000 per property grants wouldn't cover the company's network of 490 stores.
The government will be under pressure to adjust the rules to help those stuck in the middle, or override state aid guidelines.
Small and medium-sized businesses
Firms in any sector that are in receipt of small business rate relief or rural rate relief will receive a grant of £10,000. Once up and running, local authorities will contact eligible business owners rather than them having to apply for the grant themselves. Funding will start in April.
Retail, hospitality and leisure businesses with a rateable value of under £15,000 will also receive a grant of £10,000, while businesses in these sectors with a rateable value of between £15,000 and £51,000 will receive a grant of £25,000 per property.
Eligible businesses include all shops, restaurants, cafes, pubs, bars, cinemas, live music events and hotels, among others.
Companies with a rateable value of £51,000 or over will not be eligible for any Government grants.
All retail, leisure and hospitality companies will be exempt from business rates for 12 months, not just companies with a rateable value of less than £51,000.
Eligible firms should do nothing; the discount will apply to their next tax bill in April 2020.
Under new rules, businesses that cannot pay their rent cannot be forced out of their premises if they miss a payment in the next three months. This will “provide reassurance to businesses struggling with cashflows and ensure no commercial tenant is evicted if they cannot pay their rent”, Robert Jenrick, the housing secretary, said.
All UK businesses can defer VAT payments for three months; from March 20 2020 to June 30 2020.
This is an automatic offer with no applications required. VAT refunds and reclaims will be paid by the Government as normal.
Time to pay
Mr Sunak has also extended a mechanism that has been in place to help businesses affected by emergencies, such as flooding or the 2008 financial crisis. “Time to pay” agreements, which are negotiated on an individual basis between SMEs and the Treasury, allow firms to have debt collection suspended when they cannot afford their tax bill.
The Chancellor announced in his Budget that all SMEs would be able to reclaim the cost of Statutory Sick Pay (SSP) for 14 days for each employee, the maximum amount of time the Government recommends workers may need to self-isolate to protect from Covid-19. This equates to nearly £200 per person.
The amount each eligible recipient will receive will rise on April 6 from £94.25 to £95.85 per week. This will equal almost £2bn of state assistance to two million small businesses.
However, the Government has also warned that it could be many months before small businesses are reimbursed.
From March 25, businesses will also be able to apply for a three-month extension for filing their accounts, allowing businesses to “prioritise managing the impact of coronavirus”.
There are around 4.3 million businesses on the Companies House register, and all companies must submit their accounts and reports each year. Under normal circumstances, companies that file accounts late are issued with an automatic penalty.
As part of the agreed measures, while companies will still have to apply for the three-month extension to be granted, those citing issues around Covid-19 will be automatically and immediately granted an extension. Applications can be made online.
Help for employees
Under the Coronavirus Job Retention Scheme, the Government plans to pay 80pc of wages for staff who are put on unpaid leave, worth up to a maximum of £2,500 a month – just above the median income.
If employers want to top up pay levels, they can, but will not be able to claim for more than 80pc of £3,125, equivalent to a gross monthly salary of £2,500.
The scheme will cover the cost of wages backdated to March 1 and will be open before the end of April for at least three months.
The British Chambers of Commerce advises that companies interested in making use of the scheme should first designate affected employees as furloughed workers and notify employees of this change (changing the status of employees remains subject to existing employment law and, depending on the contract, may be subject to negotiation). Workers should not undertake work while they are furloughed.
Second, it says, submit information to HMRC about the furloughed employees and their earnings through a new online portal (HMRC will set out further details on the information required).
Help for the self-employed
On Thursday, Mr Sunak unveiled the self-employed income support scheme, which gives the self-employed a taxable grant worth 80pc of their average monthly profits for the last three years up to a value of £2,500 per month.
The grant is open to anyone with up to £50,000 of trading profits who make the majority of their income form self-employed work.
People can access the grants while continuing to do business.
Mr Sunak said the scheme was “one of the most generous in the world” and that 95pc of the self-employed workforce would benefit.
He added that the grants would be accessible no later than the beginning of June. Those struggling financially now can access Universal Credit, he said.
HMRC will contact individuals directly and pay the grant straight into their bank accounts.
The Government had already suspended the minimum income floor for the self-employed so they can now access, in full, Universal Credit at a rate equivalent to Statutory Sick Pay for employees. Universal Credit will also rise over the next 12 months by £1,000.
Income tax payments due in July 2020 under the Self-Assessment system will be deferred to January 2021.
On March 5, the Government declared Covid-19 a “notifiable disease”, one of the key criteria that insurance companies expect to be met before their policies begin paying out. However, the Association of British Insurers has warned that most business insurance policies are still “unlikely” to cover losses.
French insurer Axa, for example, told customers earlier this month that its general business interruption insurance does not cover losses caused by Covid-19 as it only protects against diseases specifically named in its policies. Covid-19 was not specified as it is a brand new illness.
Advice for struggling businesses
Business bodies are urging struggling small firms to open the lines of communication with lenders, customers and each other.
“Talk to your bank about financial help if needed,” says Mike Cherry of the Federation of Small Businesses, which is also encouraging business owners to talk to customers about payment.
“If a large company customer holds an invoice now, the finance team should be asked to pay it immediately,” explains Mr Cherry. For any future work, issue invoices straight away, “so they can be processed while finance teams in large firms are still operating”.
Reach out to other companies, advises Fiona Graham of the Institute for Family Business. “The community is incredibly supportive,” she explains. “By working together and sharing experiences, businesses can help each other to deal with challenges we’ve never encountered before.”