UK Chancellor Rishi Sunak has announced a new range of radical measures to assist English businesses affected by coronavirus.
To protect jobs, the UK's finance minister said the government will help pay private sector wages for the first time ever. Under the Coronavirus Job Retention Scheme, employers will be able to apply for a grant from tax authorities to cover the wages of people who are not working due to coronavirus shutdowns, but who haven’t been laid off.
The grant will cover 80% of the salaries of these retained workers, up to £2,500 per month.
• UK Chancellor Rishi Sunak's Plan for People’s Jobs and Incomes
Sunak also announced that he is deferring the next quarter of VAT payments due from businesses. No business will have to pay VAT until June, and firms will have until the end of the year to repay due bills.
In Association with
In addition, Sunak has pledged £6bn of extra support for the welfare system by increasing the UK’s Universal Credit standard allowance by £1,000, for the next 12 months. Sunak said the measures would benefit c.4 million households.
Ann McGregor, chief executive of the Northern Ireland Chamber of Commerce and Industry, said the Sunak has given businesses some desperately needed breathing room at this critical moment.
“The commitment to support the salaries of workers at risk of redundancy by up to 80% is extremely welcome, supporting the livelihoods of all those whose jobs were potentially at risk,” said McGregor. “We also welcome the deferral of VAT payments which keeps money in the pockets of businesses so that they can pay their people and suppliers.”
Irish Inaction
The UK initiatives are in stark contrast to the inaction to date in Ireland by the Fine Gael government, where prime minister Leo Varadkar and his finance minister Paschal Donohoe (pictured) don’t seem to understand the extent of the economic calamity facing the country.
One week after the government directed social distancing measures that have shut down bars, coffee shops, restaurants, cinemas, childcare providers, language colleges, discos, gyms, theatres, and many hairdressers and retailers, the Irish government has yet to outline any direct cash measures to assist stressed firms.
To date government 'action' has centred on leaning on Revenue, banks and local authorities to exercise some measure of forbearance on debtors. Beyond that there has been nothing of assistance for employers that involves state outlays.
DublinTown, which represents businesses in Dublin city centre, said footfall in the area between Monday 16 March and Sunday 22 March dropped by 66%. Footfall on St. Patrick’s Day 2020 was down 72% on a year ago.
Streets with the high concentration of hospitality businesses were most impacted. South William Street recorded a reduction of 85% while Grafton Street saw a reduction of 75% in its footfall. This means c.200,000 less people visiting the city centre each day.
The majority of Dublin Town’s 35,000 retail and hospitality workers have already been temporarily laid off or are facing a very uncertain future, according to CEO Richard Guiney.
“Many of our members are small, family owned independent retailers, restaurants and bars,” Guiney added. “Right now their ability to get through this is dependent on their cash reserves and personal savings, but few have sufficient reserves to stay afloat for the prolonged period of several months that this crisis may last for.
“Assisting employers to retain their workforce will require innovative schemes similar to some of those developed in other jurisdictions where employers and the state combine to provide a living wage for those forced out of work.”
Ibec, the group that represents Irish business, has been oddly silent as the business crisis has unfolded. The lobby group finally broke cover on March 20, declaring that public health measures remain the absolute imperative.
CEO Danny McCoy also urged government to focus on acting as an income source of last resort for households that have lost their regular income.
“Such income support measures could require up to €4 billion of funding, which would fund replacement rates of at least 70% of net wages lost, for 20 weeks, for up to 500,000 workers, if needed," McCoy stated.
“This is a substantial exposure for the state but it is one that is essential and that we can afford. Government’s response strategy must focus on keeping firms alive, keeping their employees engaged with them and protecting the income of individuals.
“Other countries have been much more extensive in terms of state credit guarantees, with many countries putting measures in place which would, if necessary, reach 10% of GDP and greater. Significant measures will need to be put in place in Ireland in order to guarantee liquidity and prevent escalation of cashflow issues throughout the supply chain.”
Various other representative groups have also pleaded for assistance, but their calls have fallen on deaf ears.
Unprecedented Package
By contrast, in the UK on March 17 finance minister Rishi Sunak unveiled what he described as an unprecedented package of government-backed and guaranteed loans to support businesses. he announced that UK government is making available an initial £330 billion of loan guarantees – equivalent to 15% of UK GDP.
“That means any business that needs access to cash to pay their rent, the salaries, suppliers, or purchase stock, will be able to access a government-backed loan, on attractive terms,” he stated. “If demand is greater than the initial £330 billion I’m making available, I will go further and provide as much capacity as required.”
In his budget the previous week Sunak had announced a Business Interruption Loan Scheme for loans of up to £1.2m. The scheme threshold has now been raised to £5m, with no interest due for the first six months
Sunak also acknowledged that as well as access to finance, businesses need support with their cashflow and fixed costs.
Sunak had previously announced a one-year business rates holiday for business premises in the retail, hospitality and leisure sectors, with a rateable value of less than £51,000. On March 17 the UK chancellor decided to provide those businesses with an additional cash grant of up to £25,000.
“Additionally, I also am today extending the business rates holiday to all businesses in those sectors, irrespective of their rateable value,” he added.
“That means every single shop, pub, theatre, music venue, restaurant - and any other business in the retail, hospitality or leisure sector – will pay no business rates whatsoever for 12 months. If they have a rateable value of less than £51,000, they can now get a cash grant as well.”
In his budget speech, Sunak also announced £3,000 cash grants to the 700,000 UK micro firms. Earlier this week, Sunak increased those grants to £10,000.
UK prime minister Boris Johnson commented that as the state is asking people to make considerable changes to their lives, it is only right that the state should stand behind them.
Sunak’s bazooka package contains little for the c.6 million people in the UK who are sole traders or self-employed. In all societies, including Ireland, where government has instituted a coronavirus lockdown, these individuals are the most exposed economically. Norway is an outlier in this regard: it says it will provide its self-employed with 80% of the average of their income over the previous three years.
