Budget: Chancellor extends financial support in shrinking economy4th March 2021
Nearly half of UK SMEs applied for financial support in 202016th March 2021
Critical problems call for bold solutions. For British businesses, problems don’t come much bigger than the coronavirus pandemic that has plagued the UK for close to a year now.
Last year, decisive policies such as furlough and the Bounce Back Loan scheme provided a lifeline for businesses when uncertainty was at its peak. However, as the pandemic has stretched on, businesses began looking for more reassurance from government.
The Chancellor Rishi Sunak certainly went a way towards that with his latest Budget statement. The headline announcements for struggling businesses include:
- Extension of the Coronavirus Income Support and Self-Employed Income Support schemes – Covering 80% of earnings for employees and self-employed people, these schemes have been extended to September.
- Recovery Loans Scheme – This new loan scheme will replace the successful Bounce Back Loan and CBILS schemes at the end of this month, with the government offering an 80% guarantee to lenders.
- VAT and Business Rates freezes – Tourism and hospitality businesses will to benefit from the 5% VAT rate until September. Business rates for retail, hospitality and leisure will also be frozen until June.
- Super deduction – Designed to encourage business investment, the two year super deduction will allow businesses to claim 130% of the cost of any new machinery as a tax cut.
- Help to Grow Scheme – Designed to improve productivity and growth, the Help the Grow scheme will give SMEs discounted access to management training and a 50% discount on productivity-boosting software.
The question is, is this enough to prevent a wave of insolvencies this year and next?
“To an extent”, says Tom Fox, Licensed Insolvency Practitioner at Umbrella Insolvency.
“The decision to extend furlough, plus additional grants, loans and tax freezes will all provide more certainty for businesses that would otherwise struggle over the next few months. Whether firms can survive without this support will be the real test towards the end of the year.
“Clearly, nobody knows what the UK will look like in a few months time. But if these various support schemes are withdrawn at the wrong time then all the government’s efforts to help businesses up until now could be wasted. I think that would be up there with the worst possible outcomes.
“In some ways, the most interesting parts of this budget are the new super deduction and the ‘Help to Grow’ scheme. I think that these are quite bold policies and indicate a desire from the government to encourage investment and growth at a crucial time for the economy.”
Is your business struggling with coronavirus pressures? Speak to a member of the Umbrella.UK business insolvency team for advice today. Call: 0800 611 8888.