The Chancellor rolled out a raft of measures last month, in some sectors to prop up the economy and in others to stimulate growth. The main overall objective was an attempt to keep millions of people from joining the dole queues, ideally for the long term.
So, now that several weeks have passed, has Rishi been successful? Well, to paraphrase George Du Maurier’s 1895 cartoon in Punch, some parts of the stimulus package have had excellent results whilst others have merely slowed the flow of bad news.
The news last week that the UK is officially in recession for the first time since 2009 came as no surprise because of the expected fallout from the pandemic. The surprise is the scale of the contraction of our economy in that period, a massive 22%, the biggest ever.
Despite the various attempts to stimulate the economy, the job losses continue to be announced. Last Monday M&S said it would cut another 7,000 jobs. Many other large employers such as BA, British Gas and WHSmith indicating that they are currently assessing how many jobs to cut.
So, what effect have Stimulus Packages had so far:
- Job retention bonus: This is designed to provide employers with extra help once the current furlough scheme finishes at the end of October. Anecdotally this appears to have had some success, with several big firms, such as Jaguar Land Rover, stating that they would now wait until early 2021 and reassess the situation, depending upon how much the economy had picked up by then.
- VAT reduction to 5% for six-months: This stimulus measure has ensured the survival of thousands of businesses in the hospitality sector and combined with most Brits taking stay-cations due to the Coronavirus travel restrictions, a degree of cautious optimism is starting to emerge.
- Eat out to help out: This is another boost for the hospitality sector and thus far has been a roaring success, with many pubs and restaurants fully booked both at lunchtime and in the evening, albeit with fewer covers because of the Covid-19 social distancing rules.
- Stamp Duty reduction: Designed to stimulate the housing market, which had become stagnant, this is yet another success story. After the measure was announced in July, in the first week agreed sales leapt 35% compared with the same week of 2019. This initial surge has now fallen back somewhat but is still 17% up on last year, and the annual increase in prices for July alone was 3.7%.
- New green deal: This is a targeted measure that appears to be working and one that has ‘saved the bacon’ of many small businesses in the various building trades. I fully expect the help package to be extended as part of the government’s longer-term plans to reduce the UK’s carbon emissions.
- Various measures to help young workers and the unemployed: All of these measures have been broadly welcomed by industry, but as they are intended as long-term assistance the fruits have yet to appear.
Are there new Stimulus Packages?
Whilst not exactly new, the second phase of the self-employment income support grant (SEISS) started last Monday. Surprisingly, a whopping 800k individuals who qualified did not claim the first time around. It’s been a tough time for many self-employed people; my advice is to check to see if you’re eligible.
The second phase will be the final SEISS grant and is capped at £2,190 per month for 3months, as it’s a grant, you don’t need to pay it back, but it needs to be entered on next year’s Tax Return as income. If you need some help go to: https://www.moneysavingexpert.com/news/2020/04/self-employed-help-coronavirus/ This site provided by Consumer champion Martin Lewis, is written in easy to understand language and very helpful.
The second area of business assistance, also not new, that has been modified and extended is the Coronavirus Business Interruption Loan Scheme (CBILS). The initial list of High Street bank and financial institutions only numbered around 20, but as at 1st August, the number is rapidly approaching 100.
The eligibility rules have been relaxed and to qualify for a loan you only need to meet the following five criteria:
- You are UK-based and have been adversely affected by coronavirus.
- Your turnover must be over £200,000pa.
- You must have been trading for a minimum of 3 years, primarily in the UK.
- Over 50% of your turnover must be from trading activity (e.g. not from investments)
- The loan is for business purposes.
If you would like more detailed information on some aspect of UK Tax, send me an e-mail and I’ll be pleased to advise further.