Rishi Sunak’s £350billion support package for businesses hit by the Coronavirus crisis is a very welcome step. Despite the headline number (equivalent to 15% of UK GDP), the view from some quarters is that the measures did not go far enough, as was reflected in the market reaction this morning. We can only wait and see if the measures are sufficient, but the Government has committed to do “whatever it takes to support our economy”.
That ought to give business owners some assurance, and our view is that we can expect ongoing support measures for businesses to be announced as the Country adapts to the pandemic. We will keep you updated.
Stimulus for Business
A key summary of yesterday’s business support package is set out below:-
- Larger companies will be able to seek support from a new lending facility launched with Bank of England.
- SME businesses (those with fewer than 250 employees, and a turnover of less than €50 million) will be able to borrow up to £5m via the Coronavirus Business Interruption Loan scheme/British Business Bank with no interest
due in the first six months – increased from the £1.2m announced in the Budget. Any business that needs cash to pay rent, suppliers or staff or to purchase stock will have access to this loan with a view to enabling them to continue to trade through the current crisis.
- Assurance that the Prime Minister’s announcement discouraging social gatherings is enough for pubs, leisure and entertainment venues (museums, art galleries, theatres, caravan parks, gyms, small hotels, sports clubs and night clubs) insurances to kick in – provided they have the relevant cover – see advice below.
- All retail, leisure and hospitality companies will be exempt from business rates for a whole year. These businesses with a rateable value of less than £51,000 will be given an additional cash grant of £25,000.
- Cash grants for the smallest businesses will be increased to £10,000.
Our advice to Businesses
We are advising a large number of businesses during the current crisis, and are assisting with discussions with their stakeholders. Our recommendations are to get on the front-foot now, and to take the following steps:-
- Government backed loans via British Business Bank of up to £5m – aim to get to the front of the queue with an “oven-ready” business case for funding. We are advised to expect the funding process to commence from the start of next week, but await guidance on when the cash will actually be paid over to businesses. We recommend that you look out for regular updates on the British Business Bank website - https://www.british-business-bank.co.uk/
- VAT and other tax payments – contact HMRC via the “time to pay” helpline to see whether you can delay these payments - 0800 0159 559. The feedback we are receiving from businesses is that HMRC are being supportive.
- 100% business rates holiday for Retail, Hospitality and Leisure businesses - the Government has extended the Business Rates discount to 100% for one year for all of these businesses. In addition, a one off cash grant of up to £25,000 will be available to all businesses in these sectors with a rateable value of less than £51,000. Any other business struggling to pay their rates outside of these sectors should speak to their local authorities.
- Business interruption insurance – if your business is in the retail, leisure and tourism sector, check the terms of your policy for business interruption, and speak to your broker. The Government has confirmed it will stand behind those businesses that do have business interruption insurance policies that include pandemics, but will have excluded COVID-19 because it is such a new virus. However, a word of caution - most of our clients’ business interruption policies have to date applied to fire and flood only.
- Communications with suppliers and stakeholders is key – despite the reprieve announced last night via the loan scheme, alongside it, SMEs should continue to speak to their bank and suppliers to keep them updated. These are unprecedented times, and continued communication with stakeholders is of key importance, as most businesses are likely to have to prioritise critical payments over other outgoings and it is important to retain goodwill with your key stakeholders and not to leave them in the dark.
- Review staffing levels – the Treasury has stated that it 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. Unfortunately, survival of your business for the long-term may mean that difficult and decisive decisions are required now. You should at least start planning, and do not lose the goodwill of your employees who are your key asset. Keep them updated, and be transparent in communications. If you require advice on short-term working or lay-offs or redundancy, our employment team is on hand to advise you.
- Cash grants of £10,000 for the smallest businesses - this scheme will be administered by local authorities, and the detail is still being finalised. If you qualify, speak directly to your local authority as early as possible next week.
Support for your Employees
- Mortgage holiday - any of your employees that are homeowners can speak to their mortgage lender to see if they qualify for a three-month payment holiday.
Burnetts - we are here to support Businesses
If you need our assistance on business matters, please contact Michael Walby firstname.lastname@example.org (075000 89250) and Vaughan Jones email@example.com
(07753 935551), or your usual Burnetts adviser.
Michael or Vaughan will ensure that you obtain the advice that you require from specialist lawyers in the Burnetts commercial, employment or private client teams. Burnetts will also work closely with your other trusted professional advisers.