Chancellor offers support to consumer businesses but will it be enough?

The March 2020 Budget was delivered at short notice in an extraordinary period of global uncertainty impacting the consumer sector. Concerns over coronavirus continue to have a major impact on consumers’ confidence, desire and ability to engage with businesses in the sector. 

More importantly, as events move at pace, consumer businesses of all sizes and their representative bodies have been extremely vocal in seeking guidance and assurance from the Government. Such activity has significantly increased given wider announcements to avoid large gatherings and socialising with others and the immediate impact on the sector. 

Recent updates

As of 18 March, the Chancellor has announced a further series of measures designed to assist the consumer sector. Such announcements are unprecedented in the modern age.

There is a sense of relief that these announcements focus on supporting retail, and leisure and hospitality businesses, both small and large, but do these announcements go far enough?

Access to funding

  • The Chancellor announced the availability of a further £330bn of loans through the business interruption scheme announced last week to help businesses with their cashflow, which should be available starting next week. Putting this amount in to context, this equates to circa 15 per cent of the UK’s GDP and further actions may be required on a wider economic basis.
  • For larger businesses, these funds will be available through a new lending facility with the Bank of England’s (BoE) Covid Corporate Financing Facility. Via the BoE, businesses will be able to sell short term bonds (with a maturity of less than one year) at current commercial terms as a means of raising funds. The scheme will be in place for 12 months and further guidance is available on their website.
  • The scheme for smaller businesses - Corona Business Interruption Loan Support (CBILS) - will allow access to these funds via Government-backed loans of up to £5m (previously up to £1.2m). Temporarily replacing the Enterprise Finance Guarantee, CBILS is designed to provide loans £1,000 to £5m for businesses facing cash flow issues. Final details are being defined but outline conditions include a business must have a sound borrowing proposition (i.e. underlying viable business), but insufficient security which historically has included personal assets to support guarantees; annual turnover less than £41m; and operate in an eligible sector. Lending can be across term loans, overdraft, invoice and asset finance from an approved lender. The loans will be interest-free for the first six months and further guidance is available online. 

A key area of concern for the wider economy is the impact on the airlines who are suffering from the immediate travel bans on a global basis. The Chancellor announced that they would be part of any such measures and discussions are ongoing, but given their size, it remains to be seen how such businesses will ultimately benefit.

Business rates/grants

Measures introduced to help businesses, include:

  • a holiday from paying business rates for all retail, and leisure and hospitality business for the next 12 months, regardless of the rateable value;
  • increasing the grant for small business rate relief to £10k (previously £3k) available to the smallest businesses; and
  • providing a £25k grant to businesses with a rateable value between £15k to £51k.

The business rates relief is welcome news and further guidance is available online. 

Time to Pay 

A key measure introduced last week was to assist businesses facing tax liabilities and managing cashflows. Our experience indicates that significant numbers of businesses are seeking to use this assistance and are contacting HMRC

Such matters will take time to agree and there is no certainty of obtaining agreement from HMRC. However, early indications are that HMRC’s Time To Pay unit have had instructions to be flexible and to keep the situation under constant review. They acknowledge that initial agreements may need to be revised as the impact unravels, which is in contrast to previous policies requiring original agreements to be honoured. At present, they do not require formal cash flows, reflecting the time pressure they are under and the uncertainties in forecasting in such unprecedented circumstances. 

A dedicated helpline has been set up by HMRC at 0800 0159 559. Further guidance is available online.

Insurance 

The Government has not officially announced that businesses within the retail and leisure and hospitality sector should close; merely recommending that such places are not frequented. This has caused uncertainty for such businesses who may not be able to claim on their business interruption insurance for the falling revenues as result of the Government recommendations. Whilst positive conversations have been had with the insurance industry, uncertainty still exists.

To help combat this, the Chancellor has introduced the additional grant of up to £25k available to small businesses with a rateable value of less than £51k, which do not have any insurance in place. Whilst this cash injection may help some small businesses, it is not clear how those who have prudently taken out business interruption insurance will be assisted, should their claim be denied. 

Impact on employers 

The reimbursement of businesses with fewer than 250 employees for the cost of statutory sick pay for any employee off work for coronavirus for up to 14 days (including those who self-isolate) remains the same, despite the change in recommendation and needing to self-isolate for seven days (for an individual or 14 days for a household). 

Impact on workers

In addition to the previously announced sick pay measures, workers in the sector should be able to claim mortgage payment holidays if they are in financial difficulty. 

Again, a welcome move, there will be other bills that need paying, but for a generation of renters who probably significantly outnumber those with mortgages, those individuals will not currently benefit. There are rumours that further support will be required for the rental generation, but these measures take time to implement. They may therefore come too late for some, especially those who work in the gig economy, who also may not benefit from other measures like sick pay. 

Uncertainty continues

As businesses switch into survival mode, a key question will be, what constitutes a business within the retail, leisure and hospitality sector? There will be businesses seeking to benefit from the outlined measures, who may well be disappointed.

So, in the context of the above, the new measures are welcome. However, uncertainty still exists; not all will be able to benefit; and further measures will likely be announced as events develop in this period.

For more information please contact

Ryan Broomfield Ryan Broomfield

Partner