Hot on the heels of the give-away Budget last week, the Chancellor of the Exchequer Rishi Sunak hasn’t hesitated to bolster support for UK businesses as they feel the strain of falling demand (driven by coronavirus health advisory).
With the country facing empty bars, empty restaurants and empty roads, he’s ripped up the rule book and pulled out the cheque book! Essentially, Sunak has doubled down on subsidised loans and provided direct cash payments to firms, particularly focussing on the retail, leisure, hospitality sectors.
So what does this mean for SMES? And when will this support land in your bank accounts and boost cash flow? Here are three key points from this afternoon’s announcement:
All businesses, regardless of size, have been given a 12-month business rates holiday. This will provide some breathing room and stave off the pressure on cash flow whilst you reorganise your finances.
Moreover, if you’re a business in the retail, leisure or hospitality sectors (so all shops, bars, clubs, restaurants, theatres, hotels and events venues etc) with a rateable value of less than £51,000 you’ll be able to apply for a £25,000 cash grant.
Remember, the Chancellor promised a formal review of the business rates scheme this autumn, so this situation could quickly change.
There has been a lot of confusion about whether firms could claim on their insurance for ‘business interruption’ because the government hadn’t instructed business to close. Today, the Chancellor clarified this point stating that for “those businesses which do have a policy that covers pandemics, the government action is sufficient to allow them to make claims.”
For smaller businesses in the retail, leisure and hospitality sectors who don’t have insurance, they’ll be able to apply for cash grants of up to £25,000 “to help bridge through this period.” Furthermore, Sunak also announced last week that the Government would be providing £3,000 grants to 700,000 of the smallest businesses. To support their cash flow, today, he increased those grants to £10,000.
To support lending to small and medium-sized businesses, Sunak has extended the Business Interruption Loan Scheme (announced at the Budget last week). So, rather than banks providing loans of £1.2 million, they will now provide loans of up to £5 million, with no interest due for the first 6 months. The government will cover their losses of up to 80% to provide confidence to financial institutions so they can lend. By subsidising these loans, businesses will be able to unlock working capital.
For larger firms, the Chancellor has set up a lending facility with the Bank of England which will allow them to access low cost commercial paper to finance their businesses.
The Chancellor said that this coronavirus is “first and foremost a public health emergency but also an economic emergency” and his announcements today certainly made that clear. The combined amount available to business is £330 billion, equivalent to 15% of UK GDP! It’s a big number but it will mean businesses can carry on doing the small things like pay their rents, their salaries, suppliers or purchase stock – all things accessible with a government-backed loan or credit on attractive terms.
In essence, Sunak wants businesses to keep going and to avoid having to let staff go. He acknowledges the pivotal role that UK SMEs play in our communities as well in our economic well-being as a nation. The critical thing will be timing: how quickly can he ship these funds out to business?
The Chancellor has named today’s announcements as part of a greater plan, the details of which will be shared with the public in the coming days. We’ll provide more information and insights as the situation unfolds.