There was considerable anticipation ahead of the Chancellor unveiling the Winter Economy Plan today (Thursday 24 September). It is likely that the South West business community will now be breathing a collective sigh of relief following the announcement of a package of support to protect against the ongoing impact of the Covid-19 crisis.
This has been a particularly tense period with the Coronavirus Job Retention Scheme (JRS) due to finish at the end of October. The recent announcement of further restrictions has added to the pressures many businesses face.
It is likely that most businesses will now feel a sense of relief as new interventions will provide some support over the coming months. Here is a summary of the key elements of the Winter Economy Plan:
Launch of the Job Support Scheme
The most significant development is the launch of the Job Support Scheme. This will start on 1 November, following the end of the JRS on 31 October.
This scheme will be welcome news to those businesses that were facing the prospect of making redundancies at the end of the JRS.
The name of the Job Support Scheme gives a subtle message as to how it differs from the JRS. The Chancellor emphasised that it is designed to protect viable jobs. It is not intended to keep people in jobs that only now exist because of Government support.
It is designed to allow employers to put staff on reduced hours, which could be especially helpful for our region’s seasonal hospitality businesses over the winter.
We are awaiting some of the detail on the Job Support Scheme, but these are the key points:
Support for the self-employed
The Chancellor mentioned a scheme for the self-employed, to run alongside the Job Support Scheme. We are awaiting further details on this.
The announcement also referenced a grant, worth up to 20% of average monthly profits from November to January. Again, more detail on this should follow.
More time to repay loans and launch of Pay as you Grow
Businesses that were concerned about cashflow may be relieved by the announcement that the repayment period for bounce back loans has been extended from six to ten years. The Pay as you Grow initiative will also offer interest only payments and payment plans for businesses that have been especially hard hit.
Even a temporary blip in cashflow can sink a business, so the extension of these payment periods could make a real difference to SMEs.
These schemes have also been extended. Businesses can now apply for bounce back loans or Coronavirus Business Interruption Loans (CBILS) until 31 December. This could be a good opportunity for those businesses that did not need this finance earlier in the pandemic but are now faced with difficulties.
Spreading VAT payments
The Chancellor announced that businesses that deferred their VAT payments as a result of the pandemic will now not need to pay a lump sum at the end of March. Instead, businesses can now spread these payments over 11 smaller sums, with no interest.
Again, this could be helpful to businesses in managing cashflow over the coming months. It avoids the crunch point, which we were previously expecting some businesses to face in March.
Extension of reduced VAT rate for hospitality businesses
The region’s hospitality businesses, including restaurants and hotels, can now also benefit from the extension to the 5% VAT rate, which was introduced in July. This was due to finish on 13 January but will now run until 31 March. This extension could make a significant difference to some of our leisure and hospitality clients.
Although these initiatives may not provide every business with a lifeline, they are likely to be widely welcomed. Overall, I see today’s announcement as providing South West businesses with positive news. As always, the devil will be in the detail and we will keep clients updated as more news emerges.
Please contact your usual Thomas Westcott advisor if you want to discuss what today’s statement means for your business.
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