“It’s going to take this country – and the whole world – a long time to recover from this extraordinary economic situation. But we will recover.” – Rishi Sunak, Chancellor.
At a time such as this, when UK the economy is in an extremely fragile state and the old adage ‘cash is king’ is truer than ever, any and all financial support packages introduced to help UK businesses get back on their feet will be gratefully received.
It appears as though the Chancellor has doubled down on his strategy in dealing with crises; ensuring vital financial resources are made available to good businesses. These businesses will create jobs and stability in the future economy of the UK and should be given every opportunity to survive the unforeseen and crippling effect of the pandemic.
Alongside the headline-grabbing announcement about the furlough scheme being extended to September were a number of other announcements which will, no doubt, feed and protect the green shoots of recovery both for businesses and individuals.
The Mercer & Hole restructuring team are experienced in assisting distressed businesses identify the heart of the problem and crafting the unique solution which gives it the best chance of survival. Business owners are strongly recommended to review these new measures, some of which are set out below, and take advantage of all of the help that is being made available.
Recovery Loan Scheme
The Chancellor announced that from 1 April 2021, the Recovery Loan Scheme will replace CBILS and BBLS. Under this new scheme, which will be available to businesses of any size, 80% of new loans of up to £10m will be guaranteed by the government.
From the information published to date, it appears as though businesses that have already borrowed under the existing loan scheme will still be eligible to benefit from this new scheme. It is certain however, that the lending banks will need to undertake their usual eligibility review and businesses that cannot realistically repay the amounts they are applying for, will be turned down.
Non-essential retail businesses will be eligible for ‘Restart’ grants of up to £6,000 per premises. That figures increases to a generous £18,000 per premises for hospitality, accommodation, leisure, personal care, and gym businesses. Furthermore, local authorities in England will receive an additional £425 million of discretionary business grant funding.
Business rates relief
Where retail, hospitality and leisure businesses are concerned, every little helps, and the Chancellor specifically recognised the fact that these businesses – particularly in hospitality and leisure – will be further hampered by restrictions once they are open. The 100% business rates relief for properties occupied by such businesses will be extended from 1 April to 30 June. Thereafter the relief will be reduced to 66% until March 2022.
Help to Grow
The Chancellor also announced the £520m ‘Help to Grow’ scheme, specifically aimed at helping small businesses to recover and prosper in the next few years. The scheme, starting in June, will offer 130,000 businesses access to heavily discounted management and digital training programmes run by business schools. Small businesses will also be entitled to 50 per cent off software up to £5,000.
The Chancellor confirmed the five per cent reduced rate of VAT will be extended for six months to 30 September 2021 with an interim rate of 12.5 per cent for a further six months; returning to the standard rate of 20 per cent on 1 April 2022. He added: “In total, we’re cutting VAT next year by almost £5 billion.” The temporary VAT cut was first introduced last July in a bid to help the hard-hit hospitality sector.
Extend Zoo Animals Fund
It was a budget with a bit of good news for everyone, from whiskey drinkers to animal lovers. The Zoo Animals fund, which provides licensed zoos and aquariums in England with support for animal care and essential maintenance costs, will be extended for a further three months.
This does come at a price though, with government borrowing at a peacetime high of £354bn and with debts set to stay higher than economic output for the next few years at least. Mr Sunak said it would be “irresponsible to allow our future borrowing and debt to rise unchecked” so we must anticipate future tax rises as the economy recovers. In fact, the UK’s fantastic vaccine rollout programme is expected to help the economy get back to its pre-pandemic size six months sooner than previously expected according to the Office for Budget Responsibility (OBR).
Directors of good businesses in companies that have possibly passed the point of no return, need to appreciate the importance of taking the right advice quickly. The UK rescue-focused insolvency legislation means good businesses have a chance to be rescued or restructured if vital steps are taken in time. It is essential that business owners get advice quickly if they need it to benefit from the recovery announcements made by the Chancellor. Please do not hesitate to contact our Corporate Advisory Team for any support you might need at this time.