Following the Budget announcement over a week ago, new chancellor Rishi Sunak has been receiving praise for prioritising the needs of the business community during the coronavirus outbreak.
In particular, his announcement of a series of new loan schemes and tax deferrals for smaller businesses has been met with commendation over social media, with many touting him as a contender for Number 10.
On Friday, (20 March 2020), the chancellor made another pledge to help UK businesses through coronavirus, but was it as well-received?
The coronavirus job retention scheme
Sunak started his Friday announcement by stating that “for the first time in our history” the government will “help to pay peoples wages.” By this, he meant “the coronavirus job retention scheme.”
A new form of funding open to employers of “large or small” including “charity” and “non-profit” businesses that are struggling to pay employee wages as a result of coronavirus, HMRC will provide the funds for businesses to cover a majority, (80%) of the wages of “retained workers” to a total of £2,500 per month, which is “just above the median income,” according to Sunak.
The purpose of the scheme is to ensure that businesses keep their employees on payroll, potentially reducing the risk of mass redundancies and the loss of hundreds of thousands of jobs due to coronavirus.
To be eligible, businesses have to prove they have been forced to lay off workers due to the economic impact of the virus.
These new measures are likely being welcomed by the businesses bearing the economic brunt of the virus such as those in hospitality and retail, many of which have been forced to temporarily close – and their staff left uncertain about their future.
The scheme will “cover the cost of wages backdated to March 1st and will be open initially at least for three months” with the scheme being extended for longer “if necessary.” The chancellor concluded by saying there would be “no limit on the amount of funding available.”
At face value, it seemed that Sunak’s salary pledge was more welcome news for UK businesses suffering from the coronavirus impact. But is this the case?
What’s the catch?
Firstly, the grants are not instantaneous but will be implemented in a “number of weeks” according to the Treasury.
This means it could arrive too late for businesses facing severe financial demands, and with their tighter cash flows, it’s likely to be smaller businesses that will falter while they wait for funding.
With the grants to be made available by late April 2020, The Federation of Small Businesses has voiced concerns over the survival of small businesses in the interim, citing the “terminal cash flow crunch” many could find themselves in before they receive the lifeline support.
The hospitality sector also has the right to be nervous about funding delays. A spokesperson for trade body, UK Hospitality said “many businesses” are likely to face “rent payments,” before the scheme is made available, meaning many could go to the wall before they have the chance to be saved.
Another question the scheme raises is what support will be granted to the UK’s sizeable self-employed population?
Where do the self-employed come in?
While the numbers of self-employed and freelance workers are notoriously hard to track, (due to their more irregular working patterns), government figures suggest it’s a population that’s growing in numbers and economic significance.
While the latest available figures from 2017 found this sector accounted for 4.5m (15.1% of the UK labour force), in 2020, this is likely to have grown more, with some sources claiming it’s at least 5m people.
From Sunak’s announcement, it seems the self-employed have been left out of the coronavirus job retention scheme, and while they will not be getting help with their salaries during this period, they will be entitled to statutory sick pay, tax deferrals and £94.25’s worth of universal credit per week.
What else is Sunak offering the self-employed?
Firstly he has deferred self-assessment payments on account, (originally due on July 31, 2020) to next year, (January 2021); and for the self-employed that earn enough to pay VAT, he is delaying payment for the next quarter.
Some believe that Sunak’s Friday announcement has focused on the financial needs of employers at the expense of the self-employed, who are left unprotected in the middle of one of the country’s greatest health-related and economic threats.
Spokespeople for the group are concerned the lack of financial support on offer will mean that many, (including gig workers and those on zero-hours contracts), will continue to work even if they get ill during the virus outbreak.
The Independent Workers of Great Britain are going one step further on this issue and are expected to issue a pre-action letter ahead of proceedings for a high court judicial review today.
Their grievances include sick pay for the self-employed, which they argue is too low for many employees in the sector.
Despite concerns from members of the self-employed community, the outlook following Sunak’s Friday announcement is largely positive for business. In fact, economists believe his actions have saved the UK from financial catastrophe, where unemployment numbers might have risen to crisis levels if his measures hadn’t been put in place.