COVID-19 support for small businesses

The end of summer has been accompanied by a rapid worsening in the COVID-19 crisis, with the UK recording a record figure for daily case numbers on September 24 (albeit with testing now at a far higher capacity than when the previous record was set in spring).

The increase in cases over recent weeks has prompted a reversal of some of the lockdown easing measures that were rolled out over the summer and it seems overwhelmingly likely that further restrictions are just over the horizon.

In response to this, Chancellor Rishi Sunak has announced a series of new measures, and extended some existing measures, in an effort to support UK businesses survive what increasingly looks like a second peak of the pandemic.

Business owners may understandably feel a sense of deja vu with the days of March when the economy quickly shut down and support schemes were rushed out to ensure the business casualties were minimal.

Picking your way through the terms, eligibility criteria and application processes for these support schemes can be tiresome for business owners. So, here we have presented a breakdown of the various support schemes available to small business owners over the coming autumn and winter.

Job Support Scheme

The flagship policy of Sunak’s announcements, the Job Support Scheme will effectively replace the furlough scheme, which all employers are likely to be familiar with. The new scheme is largely targeted at smaller and medium-sized firms, with large firms only eligible if their turnover has gone down.

Under the Job Support Scheme, employees must now work at least 33 per cent of their contracted hours. For remaining contracted hours not worked, the government and the employer must each pay one third of the employee’s wages.

It may not compare to the 80 per cent/70 per cent the furlough scheme previously paid, but for small companies that need to keep trading over the winter months, while cutting costs wherever possible, it could still prove a significant contribution. The scheme will run for six months from November 1 2020.

Coronavirus business loan schemes

As the initial wave of the pandemic worsened, the government rolled out various business loan schemes to help support UK companies of all sizes. These included some targeted directly at SMEs, most notably the Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme.

The CBILS was unveiled at the end of March to help SMEs affected by the pandemic, offering business interruption payments of up to £5 million through a host of accredited lenders. The 80 per cent government-backed loans were offered interest-free for the first 12 months.

The Bounce Back Loan scheme, meanwhile, went live in March, offering 100 per cent government-backed loans worth up to 25 per cent of the turnover of small businesses, from a minimum of £2,000 to a maximum of £50,000. Again, the government would cover the first 12 months of interest and other fees, with no repayments asked for the first year.

The Future Fund, meanwhile, offered convertible loans to innovative, high-potential UK companies affected by COVID-19. The scheme initially made £250 million in government funds available, to be matched by private investment.

In its first four months, CBILS saw £13.7 billion lent to over 60,000 businesses, while the Bounce Back Scheme delivered £35.4 billion to 1.17 million businesses. However, the schemes’ initial closing dates for new applications of the end of September caused uncertainty for some businesses still in need of funding.

However, among his announcements, the Chancellor confirmed that all loan schemes would be extended for new applications until November 30. He also announced that businesses that had borrowed under the Bounce Back scheme and CBILS would not be offered more time and flexibility on loan repayments, under his new Pay As You Grow initiative.

Hospitality industry VAT rate cut

In July, the Chancellor cut VAT on food, accommodation and attractions from 20 per cent to 5 per cent, in an effort to protect businesses and jobs in tourism and hospitality, sectors with a strong small business presence that had been hit hard by the COVID-19 lockdown.

In an effort to continue this, it was announced that the 15 per cent VAT rate cut would be extended until the end of March 2021.

The outlook may be darkening somewhat, especially with winter looming, but the UK’s small businesses have largely proven resilient to the worst COVID-19 has thrown at them so far and, for those that need it, there will still be help out there should elements of economic lockdown return.