What the Latest Government Support Package Means
With lockdown being imposed to the whole of England the Chancellor Rishi Sunak has been working hard to keep up. As a result, we’ve now had several updates to his support packages for businesses in the space of two weeks. With the situation still in development and the possibility of further announcements, businesses can be forgiven if they feel a little confused.
First, let’s wind the clock back a week or so, to the Chancellor’s first update designed to cope with the imposition of Tier 2 lockdown restrictions coming into force in many parts of the country. They include adjustments to self-employment support, the jobs support package and business grants, among others.
The Chancellor adjusted the jobs support package which was intended to come into force after the end of furlough. Previously, this required employers to pay a third of the time not worked for employees on reduced hours.
That contribution was reduced to 5% up to a cap of £125. Workers will also only have to work 20% of their time rather than 33% which means people can now work for just one day a week.
This reduces the cost for the employer, although they will have to pay the employee for the time they do work. For example, if an employee is being paid £587 for their unworked hours, the government will contribute £543 with the employer only having to find £44.
This support was supposed to be available to all businesses in regions which have been hit by Tier 3 and Tier 2 restrictions. Firms with more than £250 members of staff will have to show that their business has been impacted by the virus. The government’s contribution to the scheme rises dramatically from 33% to 61.7% for hours not worked, up to a cap of £1,541.75 per month.
However, workers will receive a little less of their original pay packages down to a minimum of 73% rather than 77% with the previous package.
That package very quickly became out of date as everyone in England entered what is effectively a Tier 4 Lockdown. Sunak was quick to announce that furlough would continue for another month until the beginning of December, but that was quickly extended to March. It was a recognition that the economic effects will be long lasting even if the UK exits lockdown as planned in December.
Employees will receive 80% of their current salary for hours not worked up to a maximum of £2,500. The extended scheme, therefore, will be more generous than that which employers were working under in October.
However, this may not help many of the people who had already been made redundant as the end of furlough approached. According to a BBC poll, over 1,778 employers had notified the government of their intention to cut 20 or more posts.
Sunak has said that those who were still on the payroll on 30th October could see their employment continue for another month if the employer is willing to meet the cost.
There is also additional support for the self-employed. The Chancellor has announced the third self-employment support scheme package will be increased to 80% of trading profits and will run from November to January. The rise continues a trend in which self-employment support has been linked to the support for employees.
Any business premises which is forced to close in England will also receive grants of up to £3,000 per month under the Local Restrictions Support grant. In addition, £1.1bn is being given to local authorities on the basis of £20 per head to facilitate one off payments to help them support businesses more broadly.
“I have always said that we will do whatever it takes as the situation evolves,” said Sunak. “Now, as restrictions get tougher, we are taking steps to provide further financial support to protect jobs and businesses. These changes will provide a vital safety net for people across the UK.”
This grant adds to the £2,100 available for businesses which can remain open but have been affected by restrictions. The scheme is primarily aimed at the hospitality, accommodation and leisure sectors which have been severely hit during the pandemic.
The grants will be available retrospectively which means businesses can apply for support dating back to mid-August.
Other support measures which were still in place remain largely unchanged. Employers can continue to receive the £1,000 job retention bonus for those employees who they keep on after the end of furlough. Businesses which have been required to close will also continue to receive support under the Job Support Scheme.
Small and medium sized businesses can also still apply for the bounce back loan. These 100% government backed loans allow you to borrow up to £500,000 and pay zero interest for the first 12 months.
Recent changes mean you can now extend the loan term for 10 years and adjust payment schedules to ensure the loan continues to be affordable. The deadline for these is 30th November although this has been put back before and may be again.
Expect the unexpected
These are the support measures set out at the time of writing, but the situation is extremely fluid. Like everyone the Chancellor has been adjusting on the hoof to developments as they happen which means further changes are highly likely.
As for how long things will stay, there is little certainty. As things stand, the lockdown measures are set to end on December 2nd. However, there is no guarantee this will indeed be the case.
One thing is clear. If a week is a long time in politics, a month can be an eternity during a pandemic. There is no way anyone can be certain what will happen. Businesses would be advised to keep an eye on announcements from the Treasury over the coming weeks and months. The landscape is fluid and changeable and nobody, not even the chancellor, can predict what will happen.
Understanding the increasingly complex structure of support on offer can be challenging. Having someone working with you who can offer expert advice about the changes and how they may relate to your business will be invaluable. They can help you understand what you can apply for, whether it will be a good fit for your business as well as helping you to keep a close grip on your finances during these difficult times.