UPDATED: Chancellor Rishi Sunak has this afternoon announced a £330bn package of support for businesses, equivalent to 15 per cent of GDP.
This comes on top of previously announced £30bn package of support for businesses to help them cope with coronavirus pandemic.
- The government will extend the Coronavirus Business Interruption Loan scheme from up to £1.2m per business to £5m with no interest payable for six months. This new loan scheme will be up-and-running by the end of next week. “Any business that needs access to cash will be able to get a government-backed credit on attractive terms,” said Sunak.
- Government will increase £3,000 cash grant announced in the Budget to up to £10,000 per business. This scheme will be administered by local authorities and the business department will be talking to local authorities this week about how the scheme will work. This is a £20bn package for local authorities. Sunak advised any small businesses in distress to speak directly to their local authorities.
- Businesses in retail, hospitality and leisure with a rateable value of between £15,000 to £51,000 will be able to access a bigger grant of £25,000.
- All retail, leisure and hospitality companies will be exempt from business rates for a whole year. However, vets, estate agents and pawnbrokers are among high street businesses excluded.
- Treasury will work with business groups to develop an Employment Support Package that will help to mitigate employment costs for small firms, thereby preventing lay-offs.
- The Treasury will stand behind those businesses that do have business interruption insurance policies that do include pandemics but will have excluded COVID-19 because it is such a new virus. However, most small businesses will still not be insured through business interruption policies because most just apply to fire and flood.
- HMRC will extend “time to pay” arrangements for companies affected by acts of God such as flooding to coronavirus. These arrangements are negotiated on an individual basis between SMEs and Treasury, which means debt collection is suspended if they cannot afford to pay their tax bill. And HMRC said that during the coronavirus pandemic, the usual 3.5 per cent annual interest on deferred tax payments will be scrapped.
Sunak said: “This struggle won’t be overcome by a single package of measures. We will support jobs, income, businesses … we will do whatever it takes.”
Prime minister Boris Johnson said: “We must do anything it takes we can do to support our economy to help millions of businesses.”
Sunak added: “We have never, in peacetime, faced an economic fight like this one.”
Johnson added: “This is a huge package for businesses large and small, making sure they have the cash flow they need.”
However, the measures stopped short of more extreme moves such as a VAT cut or delays to paying tax on workers’ wages under PAYE and there was unhappiness that the measures do nothing to help the self-employed and freelance contractors.
Paul Johnson, director of the Institute for Fiscal Studies, told the Daily Telegraph the chancellor “will need to come back with more”. He called for cuts to national insurance contributions, a delay in hikes to the minimum wage to ease pressure on companies, and increased benefits under Universal Credit.
Reacting to this afternoon’s Treasury stimulus for small business, Emma Jones, founder of Enterprise Nation, said: “Direct cash grants will provide a helpful amount of cover, helping small businesses to even out their budgeting and making room for them to continue to honour their payroll responsibilities to staff. It’s good news for the small retail and hospitality industries in particular with premises, which will get cash they don’t have to re-pay. It will delay at the very least, difficult decisions.
“What we don’t want to see is for businesses that would not otherwise survive being artificially propped up based on debt such as the new Business Interruption Loan. I wonder if this might have been better if we’d done what France announced around longer terms to pay tax and certain bills.
“It’s a shame there was nothing on insurance for the self-employed or sole traders that are losing contracts with no financial support whatsoever.”
Mike Cherry, national chairman of the Federation of Small Businesses, said: “Clearly small employers will need a huge amount of support to keep staff on their books at this hugely difficult time, so it was good to hear the chancellor pledging to develop an Employment Support Package to help make that possible. We will be working together with the government to ensure the employment package provides for the self-employed.”
But Ian Cass, managing director of the Forum of Private Business, told The Times: “A loan is not going to solve the problems of a company that’s on the brink, it risks pushing the problem down the road.”
Compare business loans from across the market with our partners, Know Your Money.
What have other countries done to help small businesses?
Compared to the UK’s £30bn coronavirus fightback package, France has announced a €300bn (£273bn) “guarantee” that no French firm would go bust as a result of the country going into lockdown. French measures to help companies and employees weather the coronavirus storm will be worth some €45bn, the country’s finance minister Bruno Le Maire said on Tuesday.
The German government is offering loans of unlimited size to all companies in order to avoid businesses collapsing and jobs being lost. “There is no upper limit on the amount of loans that [the state development bank] can issue,” finance minister Olaf Scholz said, according to the Financial Times.
The Danish government will compensate as much as 75 per cent of the wages of businesses, providing they do not making people redundant. Companies claiming must be in danger of having to cut at least 30 per cent of their workforce or 50 people or more.
The Italian government has greenlit a €25bn package, suspending all tax payments until the end of May, compensating up to 60 per cent of commercial lease costs for businesses and guaranteeiing loans of up to €5m for small and medium-sized companies.
Spain has said it will allocated up to €200bn to tackle the economic impact of coronavirus. This is on top of a previously announced €17bn package – equivalent to about 1.4pc of GDP – which includes tax and social security credits and almost €4bn for health services.
Grants can sometimes be combined with other forms of funding, such as banks, grant makers, crowdfunding platforms and other lenders. In fact, we have teamed up with FundingOptions.com to help you find the right finance for your business. You can find their page here.
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