By Nic Redfern, Finance Director of KnowYourMoney.co.uk

Back in March, when Chancellor delivered his Spring Budget, unsurprisingly much of the statement was dominated by the escalating coronavirus pandemic. With a menu of short-term measures put in place to safeguard the lives and livelihoods of millions in the UK – most notably, the coronavirus job retention programme and various business loan schemes – the Government made a pledge to help UK businesses weather the storm.

Over six months on, and after a brief period of respite for the economy in the Summer, the Prime Minister has now been forced to impose a new set of restrictions on economic and social activities. In response to the worsening COVID-19 crisis, the Chancellor Rishi Sunak has once again called off plans for a Budget this year, in exchange for another round of shorter-term measures.

In short, long-term planning has been set to one side as the Government continues to focus on the immediate challenges posed by the pandemic. On 24^th September, the Chancellor unveiled his ‘Winter Economy Plan’; as the name suggests, it was a fiscal strategy designed to get the UK through the next four or five months.

The short-term measures inevitably pose issues for businesses. While it is undoubtedly difficult for the Government to implement wide-ranging, long-term economic policies in the midst of a pandemic, businesses will equally find it difficult to plan without a level of certainty. Companies might, in turn, shy away from investing or hiring new members of staff until they know more.

Nevertheless, that is the current landscape that business leaders must navigate. It is important, therefore, to delve further into the Chancellor’s Winter Economy Plan and assess how companies might be affected by it.

The Coronavirus Job Support Scheme

The Job Support Scheme will support businesses and employees who are facing lower demand than usual due to the pandemic. It is different to the current furlough scheme, which is set to come to an end on 31^st October; now, employees will be required to work for their company for at least 33% of their usual hours in order to qualify. Employees will receive 77% of their usual pay, with the Government contributing a third of this, and the employer paying the remaining third.

The scheme will be targeted at those who need it most – all small and medium-sized firms (SMEs) – but larger companies will also qualify if their turnover has fallen by a third.

Business loans

As part of the statement, Sunak also announced a “pay as you grow” initiative in order to help companies repay state-backed business loans taken out during the pandemic. The loans can be extended from over a period of six to ten years, cutting monthly repayments amounts by almost half. What’s more, firms really struggling in the difficult climate can suspend their payments, making interest-only payments instead.

The Chancellor also announced that state-backed loan schemes are to be extended until the end of 2020, and that the Government is commencing work on new loan programmes for next year.

Plans to increase VAT culled for leisure and hospitality sectors

It goes without saying that the leisure and hospitality sectors have been among some of the hardest hit by the COVID-19 crisis. Even with the success of the Government’s Eat Out To Help Out scheme, which saw consumers claim more than 100 million meals during August, the Chancellor’s statement acknowledged that the tightening of social restrictions would pose further issues for the sector’s recovery.

Indeed, the imposition of a 10pm curfew on bars, pubs and restaurants is likely to depress trading; as such, the Chancellor stated that the current plans to increase VAT from 5% to 20% would be cancelled to ease any additional financial burdens for struggling businesses.

With the 15% VAT cut extended for hospitality and leisure firms until the 31^st March 2021, this should offer some help to firms and protect jobs throughout the tough winter period. However, as the crisis currently shows no signs of abating, businesses should also have other plans in mind to safeguard their operations while making the most of the support available.

All in all, it is clear that by cancelling the main Autumn Budget to focus on short-term measures, the Government has signalled that it is still very much in crisis mode. Yet at the same time, the Chancellor has reaffirmed his commitment to help businesses through the pandemic.

It is now up to business leaders to leverage the support available and set about making their own long-term plans for survival, while trusting that, if needed, the Government will provide further safety nets in the meantime.