Chancellor’s Autumn Statement
As coronavirus restrictions were tightened for the upcoming winter, any hopes for a recovery of UK economic activity were swiftly shattered. Businesses have been forced into reversing efforts to encourage staff back to the office after the Government urged workers to work from home where possible. This spelt further suffering for the high street which was already struggling to survive as a result of the dearth of workers returning to their workplaces and the emerging popularity of online shopping.
Having categorically refuted the possibility of extending the furlough scheme and other Government support measures, the dire reality has forced Mr. Sunak to rethink anticipated strategies. Plans to set out an autumn budget to kickstart the economy with potentially higher taxes to stabilise the fiscal deficit have been shelved with the Chancellor back into crisis management mode. A host of new measures have been launched and existing ones revised to keep businesses afloat across what is likely to be a harsher winter for economic activity. The following details summarize the highlights of his autumn statement and the implications of the same.
I. VAT held constant at 5% for Hospitality and Tourism
Hospitality and Tourism, considered two of the hardest hit sectors from the coronavirus crisis, will have their VAT rate maintained at 5% until 31 March 2021 instead of the planned deadline of January 13. Whilst providing some respite to the sectors which have been in turmoil since the outset of Covid-19, much still relies on the willingness of consumers to venture outdoors and/or travel abroad for the lower prices to be meaningful. Given the impending unemployment crisis as the £39 billion furlough scheme begins winding down, the anticipated outlook for both sectors remains grim with demand not expected to bounce back until at least 2021.
Firms in both sectors have repeatedly called for extensive support measures to avoid a collapse of the industry and mass unemployment.
II. Introduction of the Job Support Scheme
Hailed by the Chancellor as a crucial lifeline to businesses across the country who will witness supressed demand, it is applicable to workers who are currently working at least a third of their normal hours and being paid for the same by their employer. The scheme will remunerate two-thirds of their remaining pay with the Government and their employer each paying one-third of the sum, with the Government’s contribution capped at £697.92 a month. For example: If your monthly pay was £1000 and you’re presently being paid at least £333[1/3*£1000], you will receive roughly £222[1/3*£667] each from the government and your employer. This takes your monthly wage to approximately £777. Viewed by the chancellor as targeting viable jobs and keeping workers in a job, even if only on a part-time basis, rather than making them redundant, the scheme will operate for a period of 6 months from 1 November 2020. The scheme is eligible to all small and medium sized entities, albeit larger organisations can only access it where revenue has declined drastically as a result of Coronavirus.
III. Changes to terms of Bounce Back Loans
Changes to the scheme have resulted in it being termed ‘Pay as you Grow’. The length of repaying the loan has been extended from 6 years to 10 years which nearly halves the monthly repayment allowing businesses more time to structure their finances to service the debt. Firms which are experiencing difficulties can also make interest-only payments for a given period of time whereas those witnessing trading conditions deteriorate significantly can claim payment holidays for up to 6 months. The deadline for applying for all 4 of the Government loan schemes has also been extended until the end of 2020.
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