There is no escaping the fact that the coronavirus pandemic looks likely to create major challenges for businesses large and small, for the employed and self-employed and everyone from the company director to the entrepreneur.
Here at KBL Accounts, we pride ourselves on staying abreast of any changes to the financial landscape, so we can inform and advise our clients accordingly. This has been vital during this escalating health crisis as the situation changes minute to minute.
However, there are some answers we simply do not have for you… yet.
This is because details on who can benefit and how are still in discussion.
However, as professional accountants, we are at the forefront of managing, safeguarding and advising on the financial stability and integrity of the businesses we work for. So, we want to reassure you that we are closely monitoring this situation and we will keep you all informed if, and when, we think you need to act.
The highlights to date
There has been a raft of support measures offered to business and workers to protect against the economic emergency caused by the coronavirus.
These include £330bn in state-backed loans, £20bn in other aid, a business rates holiday and grants for retailers and pubs. Help for airlines is also being considered.
But what does this mean for you?
This will vastly depend on the sector you are in, the size of your business and your assets.
However, the highlights – and our immediate reaction to them - are:
LOANS
· The government will make available £330bn of loans backed by the state to support businesses.
The idea behind the loans is to support businesses that need urgent access to cash, such as to pay landlords and suppliers.
Only firms able to demonstrate they were in sound financial heath before the virus struck will be eligible, while the terms will be comparable to what the firms could have received in the commercial bond markets prior to the crisis.
For smaller firms, the chancellor said he would expand the business interruption loan scheme – a plan announced at last week’s budget that will be delivered by the British Business Bank, the state-backed lender – to offer firms up to £5m of loans with no interest due for the first six months, up from a previous proposal of just £1.2m.
Our thoughts: At this stage, we would urge caution on taking any business loans but would urge all businesses to explore the grant schemes instead – whether they think they need them or not. Loans are likely to be low interest to begin with but that money will need to be clawed back somehow once this crisis is over – and this might include hefty interest rises.
CASH GRANTS
· All small companies occupying business premises with a rateable value of between £15,000 and £51,000 will be eligible for grants worth £25,000.
Britain’s smallest 700,000 businesses – across all sectors of the economy – will also be eligible for cash grants of £10,000.
Our thoughts: Forget the loans at the moment and concentrate on the grants. In our opinion anyone eligible for a business grant should take one – whether they need it or not. Once the crisis is over, the economy will be in a bit of a mess. You may not need the help now but you might kick yourself later when the struggle doesn’t vanish alongside the virus and the grants are no longer on offer.
BUSINESS RATES
· The taxes levied on commercial premises will be abolished this year for all retailers, leisure outlets and hospitality sector firms, in a dramatic escalation of a relief package announced during The Budget.
The original plan was for the rates holiday to apply only to small firms in the sector, although this was expanded to support to all companies in the industry. Even before the change, the plan would have covered almost half of all business premises in England. Now it will go much further.
Our thoughts: The measures are designed to protect some of Britain’s biggest employers, with at least 6m jobs across the retail and hospitality industries. It’s a brilliant idea and one all businesses in this sector will benefit from.
OTHER STEPS
Support for the food industry will be provided by relaxing regulations to allow pubs and restaurants to start providing takeaways without securing planning approval.
The chancellor has also confirmed that the government’s advice that the public should stay away from pubs, clubs and theatres is sufficient for companies to claim on their insurance if they had a pandemic clause.
Britain’s biggest mortgage lenders have agreed to support customers struggling to repay their home loans as a result of the coronavirus, with payment holidays of up to three months. There is now plans to protect renters for the same period of time.
In a hint of further steps to come, the government is now in talks with trade unions and business groups to develop “new forms of employment support to help protect people, jobs and incomes” – this could be in the form of enhanced sick pay or benefits which could be made more generous.
What about the self-employed?
Significant number of workers, particularly those in the gig economy or on flexible contracts, are likely to see a big drop in income.
The chancellor has said that people ineligible for statutory sick pay (SSP), such as the self-employed, will be able to claim employment and support allowance (ESA) from the first day they are out of work, rather than the eighth day, as was previously the case. However, ESA is just £73.10 per week, or £57.90 for people aged under 25. That is not enough for most people to live on.
Zero-hours contract workers can claim SSP if they earn more than £118 per week. If they earn less, they may be able to claim unemployment benefits.
All of this is still being discussed.
We are here for you
As we have seen in the last few days, the situation is rapidly evolving.
We will strive to keep you abreast of all the changes – and how you or your business can ride through the storm as it unfolds.
As always, you are welcome to ask us questions on your business and personal finances and how these may be affected. However, we are currently being inundated with emails so please be patient with us. We will respond to each and every one of you but it may take us slightly longer than usual.
In the meantime, please stay safe.