Rishi Sunak’s Economic Statement addresses economic and business recovery.

At 12.30 today, The Chancellor addressed the House and the Nation regarding his 3 Point Plan to re-open the economy by supporting businesses and employees.

In his statement he called for decisive action to protect the economy as businesses worry about going out of business, employees remain anxious about job losses and the hardship which lies ahead.

In just 2 months, the economy has contracted by 25%. The same amount it grew in the previous 18 years, leading to the deepest global recession since records began. The Bank of England are projecting significant job losses. A very real and urgent challenge as businesses struggle to survive.

Today’s Statement addresses how the Government can face this public challenge and put the UK back in a stable condition. So, today marked the second phase of the three step economic response to COVID 19 which is:

  • Phase 1 – Protect
  • Phase 2 – Support
  • Phase 3 – Rebuild

 

The Phase 2 – Support Summary

In Phase 1, a £160 billion plan was put in place to protect jobs, income and businesses as they had to close. In addition, 1 million businesses were supported through tax, loan and grant assistance. This intervention significantly protected income.

Phase 2 now concentrates on re-opening the economy to try and mitigate businesses having to stop trading and hiring. It focusses on economic and business recovery and the Economic Statement announced a number of initiatives to try and lessen the number of businesses closing and therefore saving jobs. These were;

 

Job Retention Bonus

Employers who get employees back from furlough and continuously employ them through to January, will receive a £1,000 bonus per employee. The employee must earn a minimum of £520 per month from November until January for the employer to qualify. If the 9 million people on furlough return, this will be a £9 billion policy.

 

3 Point Plan

A 3 point plan which aims to 1) support people to find jobs, 2) create jobs and 3) protect jobs, will see a number of initiatives launched. These include:

  • Kick-start scheme – for young people of 16-24 to get a job. £2 billion has been committed to employers who create new jobs that at least meet the minimum wage and are 25 hours plus per week. Employers can expect to be supported for 6 months with their overheads for all new kick-starters in a job by Autumn. There is no cap on the number of places.
  • New trainee scheme – £1,000 to employers in construction, engineering and social care who take on a new trainee.
  • Careers advice – ¼ million more people will be supported.
  • Sector based work academies – places will triple on these academies.
  • Apprenticeships – for the next 6 months, employers who create new apprenticeships will receive £2,000 per apprentice. For apprentices of 25 years old and above, employers will receive a £1,500 bonus.
  • DWP – £1 billion pounds will be invested to support unemployed people back to work.

 

Investing in infrastructure

Alongside the £88 billion of capital already announced, an additional £5 billion will be provided for investment projects covering the 4 corners of roads, schools, hospitals and high streets.

 

Protecting jobs that already exist

The hospitality and tourism sector employ 2 million people. 80% of hospitality firms had to temporarily stop trading in April 2020 resulting in the highest proportion of furloughed workers in any sector (1.4 million). To aide business recovery here, Rishi Sunak;

  • Decreased VAT on hospitality & tourism from 20% to 5%. This will take effect on 15 July and last until 12 January 2021. 150,000 businesses will benefit, hoping to protect 2.4 million jobs.
  • An eat out to help out 50% customer discount will be offered by businesses to customers (for businesses who register). This discount will apply during the month of August on a Monday, Tuesday and Wednesday.

 

Summary

A number of other initiatives including green jobs and green home grants and 0% stamp duty on properties up to £500,000 were announced by The Chancellor in this Phase 2 Support Summary before we move to Phase 3 – Rebuild.

Will these measures be enough to keep businesses trading? For some yes and the announcement is a positive step for economic and business recovery but there have been and will continue to be businesses who will unfortunately become insolvent. Businesses closing and jobs being lost is inevitable, but today’s Statement is all about damage limitation. Over the coming months, the UK will start to see what results The Chancellor’s Economic Statement brings and will welcome all of the positive outcomes for business recovery.

The Government is being forced to react to unprecedented circumstances as are businesses in recovery mode and those threatened with insolvency. Business owners and their advisors need to be aware of how The Chancellor’s Economic Statement could affect the decisions they need to take.

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