Did Sunak Save UK Business — answers and questions in 12 points:
On Friday night the UK Chancellor stood up and offered to pay 80% of salaries for ‘furloughed’ staff to combat the coronavirus effect on markets. But how does it work? Who gets the money? Will it work? And what do UK businesses do?
1. Help for UK businesses “…might be in place by the end of April, and payments could be backdated to the start of March.”
https://www.ft.com/content/973dc0c0-6ae4-11ea-800d-da70cff6e4d3?sharetype=blocked
This means business has to keep staff on now without certainty that the govt scheme will cover them? And the negative cashflow of 2 months wages…
2. Freelancers are not included and will be unable to claim Universal Credit if they have savings
3. How broadly will this scheme apply? Paul Johnson at the IFS is talking tens of billions, so, £50bn would support 7m workers for 6 months?
https://twitter.com/PJTheEconomist/status/1241111505346625545
4. Self employed will see delays to tax collection and no business will pay vat until June.
5. Sunak has already announced £7bn on business rates relief for leisure companies (how defined?)
6. And £20bn of grants (but grants of £10k to small companies on small business rate relief — doesn’t pay wages for long)
7. Retail, hospitality and leisure business can get a £25k grant (if rateable value is between £15k and £51k).
8. There are also loans — but what’s the point of a loan if your market suffers a heart attack? (Here’s the link to the Business Interruption Loan Scheme)
So, what do businesses do…?
What business needs to know about Sunak’s 80% salary proposal:
9. If an employee is laid off during this period and taken back on, can they then be treated as furloughed in order to qualify?
10. Business then needs to predict the size/ shape of the post covid-19 market….in order to keep the right people.
11. More importantly, how do businesses innovate to ‘create’ future post covid-19 markets?
12. If countries apply a hard lockdowns (as per Spain or France) and not a slow foot drag response (as per US and UK despite improvements) then the lockdown will be over in 7 weeks. https://medium.com/@tomaspueyo/coronavirus-the-hammer-and-the-dance-be9337092b56
Lastly, the advice here remains valid, albeit updated for government support, you can’t cut your costs in a market that has stopped — you need to be more radical: https://mediamodo.co.uk/2020/03/how-to-save-your-scaleup/
12. Other useful links:
UK govt advice on grants
https://gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19
UK govt explanation of ‘furloughed’ status