By Andrew Webb, Chief Economist, Grant Thornton
Cast our minds back to the Spring Budget announced by British Chancellor Rishi Sunak on 11th March and we recall what on that date was deemed to be a generous package designed to deal with all that the coronavirus could throw at us.
At a projected cost of £12 billion, the interventions included increased funding for the NHS, loans and tax reliefs for businesses, and some changes to statutory sick pay and benefits – but that was just the first tranche.
Six months later, and despite the introduction of various additional measures including the furlough scheme – and an ever mounting public debt – it has been clear in recent weeks that more would be required to help the UK economy through the potentially lean winter months.
Taking to his feet in the Commons yesterday, the Chancellor said there could be “no harder choice” than opting to end the furlough scheme adding that the focus must now turn to stable jobs that offer “genuine security”.
It is in response to growing concern of so-called ‘zombie jobs’ kept just barely alive by being part of the furlough scheme when in reality, they are destined to be lost.
As the furlough initiative winds down at the end of October to be replaced by the Jobs Support Scheme announced yesterday – which requires employees to work at least some hours – we may begin to see more starkly the impact of COVID-19 on employment levels. Firms will have to decide whether or not to keep staff on or move them to this new arrangement.
Designed to help businesses that anticipate weak demand during the winter period retain their employees, some concerns have been expressed that the scheme will simply move the job loss cliff edge a further six months down the road.
And with the measure expected to cost the government around £300 million a month, it will also add considerably to the mounting public bill.
Other announcements included an extension to the amount of time allowed to repay Bounce Back Loans from six to 10 years, while lenders will be able to extend the Coronavirus Business Interruption Loan Scheme by the same amount, resulting in lower monthly repayments.
Companies wishing to avail of either loan scheme also now have more time to do so, with the deadline for applications extended to the end of November.
Businesses and those who complete self-assessments will also be given more time to pay any tax bills they had chosen to defer until next year, rather than face a single lump sum in January.
Meanwhile, the cut in VAT for the tourism and hospitality sector will be extended until the end of March, providing welcome relief the operators in the industry.
There is no doubt, bar a few exceptions, the Chancellor’s newly announced measures are to be broadly welcomed by businesses still fearing full recovery is some way off. With that fear in mind, and considering how far we’ve come in six months, and the unprecedented levels of public aid, some may ask if we’ve yet seen the end of government interventions to stem the impact of the coronavirus.