Privalgo Commercial Director and Co-Founder Matthew Clarke analyses chancellor Rishi Sunak’s packages to help business’.
On Friday, chancellor Rishi Sunak unveiled the largest set of economic relief measures ever seen in peacetime to tackle the economic impact of the Coronavirus. These were very bold and sweeping measures, especially from a Conservative government which has now essentially nationalised vast swathes of the private sector. These measures provide hope and potential lifelines for business in this uncertain climate.
Coronavirus Job Retention Scheme
All UK businesses are eligible for the Coronavirus job retention scheme and the government will pay up to 80% of employees’ wages, to a maximum of £2,500 a month. Businesses will need to designate to the HMRC affected employees as ‘furloughed workers,’ and notify employees of this change. There is also statutory sick pay relief for businesses and VAT can be deferred for the period 20th March to the 30th June.
The chancellor has guaranteed £330bn of loans available to Large Corporates through the COVID Corporate Financing Facility which will be overseen by the Bank of England. This is effectively a government promise to buy short-term IOUs from companies that have an investment grade – i.e. businesses with a very high credit rating. For smaller businesses (annual turnover less than £45m) there is the Coronavirus Business Interruption Loan Scheme (CBILS), administered by the government owned British Business Bank, which will offer 12 month interest free loans up to a value of £5m. Business owners can apply to 40 accredited banks which include most high street banks. The government has also pledged to underwrite 80% of the repayment for banks encouraging them to give approvals. All participating banks and further information can be found on their Website.
The government is also making available a cash grant of up to £25,000 to companies in the hospitality, leisure and retail sectors if they operate in commercial premises with a rate-able value of less than £51,000. Smaller grants of up to £10,000 are available for other businesses which will be awarded through local councils.
Will this be enough?
The packages released by the government are unprecedented in scale and should provide relief for businesses and reduce the high level of unemployment this crisis will undoubtedly incur. However, these schemes may still take up to three weeks for businesses to put in place which for many maybe too late and there is also the risk that many businesses will fall into a type of no man’s land between the loan and financing schemes. Some will be too big to take advantage of the CBILS but not have an investment grade credit rating to take advantage of the COVID Finance Facility. With the full impact of this virus still yet to playout and no specific exit strategy for the social measures being taken, we expect further relief will be needed and more extraordinary fiscal policies to be announced amid the nationwide shutdown.