What does the economic update mean for businesses?

  1. James Martini

    James Martini UKBF Ace Staff Member

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    Chancellor Rishi Sunak’s had his hands full since taking the top job at the Treasury, and yesterday he revealed a range of measures to help businesses survive the next phase of the COVID-19 pandemic. 

    Since the coronavirus crisis forced the UK into lockdown back on 23 March 2020, more than £160 billion of taxpayers’ cash has been spent on protecting jobs, incomes, and businesses. 

    Building on that, the Chancellor loosened the purse strings further by outlining his ambitions for a recovery from the economic damage caused by the virus.

    Furlough bonus scheme

    Employers who successfully bring back furloughed staff will be eligible to claim a job retention bonus of up to £1,000 per employee. 

    Of course, there are strings attached to that and furloughed workers need to be continuously employed through to January 2021 for an employer to qualify for the bonus.

    Employers need to pay furloughed workers at least £520 a month, the equivalent of the lower National Insurance threshold, from November 2020 to January 2021. 

    With 9.4 million people on furlough as of 5 July 2020, the measure could cost the Treasury in excess of £9 billion. 

    Incentives to create jobs for young people

    Business owners who take on new employees aged 16-24 may qualify for a slice of the £2bn kickstart scheme, which aims to give young people a chance of getting a “decent job”. 

    The employees should be under 24 years old and in receipt of Universal Credit, while employers need to offer six-month placements to be eligible for the funding. 

    If employers meet the conditions, funding available for each job will cover 100% of the relevant National Minimum Wage for 25 hours a week, plus the associated employer National Insurance contributions and employer minimum workplace pension contributions.

    Applications for the scheme open next month, while the first jobs will be taken up in the autumn. The scheme will run until December 2021, though it is likely to be extended if successful.

    Employer payments for apprentices

    Employers in England will receive £2,000 from the Government if they take on new apprentices under the age of 25 from 1 August 2020, or £1,500 for new apprentices over 25. 

    This scheme will be in place until 31 January 2021 and these payments will be in addition to the existing £1,000 payment the Government already provides for new 16-18 year-old apprentices, and those aged under 25 with an education, health and care plan.

    VAT cut in hospitality and tourism

    The rumour mill went into overdrive prior to the economic update suggesting a temporary cut to VAT was in the pipeline, and they weren’t far off the mark.

    Having already given VAT-registered firms who’d seen their cashflow disrupted by COVID-19 the option to defer payments up to 30 June 2020, Sunak cut the standard rate of VAT from 20% to 5% for hospitality and tourism businesses.

    From 15 July 2020 to 12 January 2021, the reduced (5%) rate of VAT will apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises across the UK. It also applies to supplies of accommodation, such as hotels and B&Bs, and admission to attractions. 

    Rishi’s meal deals in August

    Building on those support measures, Sunak offered his version of a ‘meal deal’ to entice consumers to spend some of the cash they’d saved up during lockdown to return to eating out.

    Food service firms, such as restaurants, cafes or pubs, can sign up for the ‘eat out to help out’ scheme, which offers diners a 50% discount of up to £10 per head on their meal or drinks at any participating business. 

    The Chancellor’s eat-in meal deals will run from Mondays to Wednesdays throughout August, while businesses that sign up to the scheme will be fully reimbursed for the 50% discount.

    If he has a plan for jobs, why doesn’t he mention it?

    Sunak used the phrase “a plan for jobs” 11 times in his speech, along with the startling line “doubling down on levelling up”.

    All of these measures, taken together, are about moving from support schemes designed for a nation in lockdown to one that is gradually coming out of its enforced hibernation.

    The big question now is whether it will be enough to get consumers out and spending when COVID-19 is still a grim reality.

  2. bluenun

    bluenun UKBF Enthusiast Full Member

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    On the one hand I can say there are going to problems in certain sectors, but there are also opportunities. I've had more calls about contract positions in the last two weeks than I've had for years.

    For IT (my area) projects are going ahead - but employers want the option of cancelling the project and with it the people hired to deliver. What contracting has always been about. Do the job, no holiday pay / sick pay pension etc - no red tape for the client - just get the job done.

    I wonder now if the Govt. will finally stop the unworkable IR35 law that various Govts. have been trying to implement since early 2000s.
    Last edited by a moderator: Jul 16, 2020
    Posted: Jul 14, 2020 By: bluenun Member since: Dec 11, 2008