‘It marks the start of UK’s economic fightback’ – business leaders react to Sunak statement

Chancellor Rishi Sunak has said government will pay 80% of workers’ salaries – that qualify under the new measures – as part of an ‘unlimited’ effort to help businesses impacted by the coronavirus pandemic.

He also announced a whole raft of other measures aimed at offering support during this difficult economic period. These included:

  • Launch of a coronavirus job retention scheme, allowing any employer the opportunity to apply to HMRC to have up to 80% of a member of staff’s salary paid – capped at £2,500 a month – backdated to 1 March, running for three months (a time-scale which will be kept under review) with no limit on funding for the initiative.
  • Deferral of any VAT due for the next quarter, and a deferral of self-assessment sums due until January 2021, alongside suspension of the Minimum Income Floor for sole traders claiming Universal Credit.
  • Extension of the interest-free period for loans taken out through the business interruption loan scheme from six months to 12.

But how have business leaders reacted to the announcement?

Federation of Small Businesses (FSB) National Chairman Mike Cherry comments: “The closure of thousands of small businesses on our high streets will threaten futures. It’s critical that the cash grants being made available to those in the retail, hospitality and leisure sectors reach them as swiftly as possible – and extension of their scope to other sectors given serious consideration. Insurers must stand ready to help those with business interruption policies.

“The coronavirus job retention scheme marks an unprecedented intervention. Executed swiftly, it will protect livelihoods and the viability of small employers. Putting a straightforward application process in place for the scheme will be central to its success. Many small employers will today be breathing a huge sigh of relief.

“However, the fact that it will not be operational for a month means many small employers are still presented with an immediate, potentially terminal cash flow crunch. Therefore it’s vital that banks play their part, and ensure that any small business owner seeking a 12 month interest free loan from Monday is helped immediately – there are no excuses.

“While it was encouraging to hear the Chancellor pledge his support for the self-employed today – with a commitment to defer self-assessment and VAT bills and suspend the Minimum Income Floor – this Government has a long way to go to show it’s on the side of our five million-strong self-employed community.

“We need to see the Prime Minister’s ‘whatever it takes’ approach extended to the self-employed – that means following the lead of other nations by guaranteeing 80% of incomes for those who lose work.”

Jonathan Geldart, Director General of the Institute of Directors, said: “This was a hugely significant step forward for employers.

“Relying mainly on loans wasn’t going to be enough, as many business leaders balked at the prospect of taking on more risk. Grants to support employment will be a much more welcome approach for firms stuck between cutting costs and retaining staff, but the acid test of these policies is how fast they reach businesses.

“The perilous position of the self-employed can’t be ignored. While steps to ease the tax burden will provide relief, there are many entrepreneurial people out there who had good businesses last month, but for whom demand has now completely disappeared.

“However, the scale of the new measures can’t be downplayed, and the deferral of VAT is another substantial move.

“We’ll be getting the message out to directors about the new support, but we’ll also be listening to their response. We know there are still many other areas of concern, including commercial mortgages, rent, late payments and many more.

“The Government has closed more businesses tonight, but we know this may not be the end of public health response, so Ministers must be ready to act as necessary.”

Sam Dumitriu, Research Director, The Entrepreneurs Network, says that start-up businesses will need extra help: “Today’s radical interventions will protect jobs and save businesses. We welcome the announcement that employers will be supported to retain staff and will have access to additional cash flow through tax deferments.

“Startups that are not yet bringing in revenue will need additional targeted support as they approach the end of their funding runways. They are ill-suited to taking on debt, such as the Business Interruption Loans, and are unlikely to benefit from rates relief or grants, as many use co-working spaces.

“It is vital new measures are announced for this group in the coming days. If we want the economy to rebound once we have beaten the virus then job-creating startups cannot be overlooked.”

Colin Leckey, partner at Lewis Silkin, says that these measures should have been taken earlier: “Employers have been crying out for a package like Denmark’s where the state effectively underwrites payroll for a period of time.

“All week we have been hearing from employers scrambling to cut staff pay and hours, put people on unpaid leave, and even implement emergency and wide ranging redundancy exercises, because they are panicking and can’t see an alternative.

“While some sectors are worse hit than others, such as retail, hospitality and leisure worst of all, only this sort of massive state intervention is likely to slow down mass layoffs.”

Dame Carolyn Fairbairn, CBI Director-General, comments: “This is a landmark package of measures for business, people and jobs. The Chancellor’s offer of substantial payroll support, fast access to cash and tax deferral will support the livelihoods of millions. Firms and employees will respond with relief and determination.

“It marks the start of the UK’s economic fightback – an unparalleled joint effort by enterprise and government to help our country emerge from this crisis with the minimum possible damage. An important day for our country.”

Peter Webb, Managing Director at Electronic Temperature Instruments (ETI), the UK’s largest digital thermometer manufacturer specialising in the food & drink industry, gives his own account of how the pandemic is affecting his business and what difference the announcement may make.

He comments: “There was no choice. We are in a sink or swim situation. For us at ETI, we have a number of vulnerable employees with underlying health problems not often visible to their peers, in addition to pregnant employees as well. Therefore we have absolutely no hesitation, or indeed a choice, other than to send them home for 12 weeks.

“These new measures had to be about paying people and keeping them in work. I feel the Chancellor and government have done all they can up to this point. Let’s make no mistake about it, for many businesses and industries, these are desperate times.

“Therefore desperate and quite simply unheard of measures were required. I applaud them for stepping in, or perhaps stepping up, to help pay wages with the aim of saving as many jobs and livelihoods as possible.”

Phil Smith, Managing Director at Business West, said: “The Chancellor has given businesses desperately needed breathing room at this critical moment.

“The deferral of VAT payments keeps money in the pockets of businesses so that they can pay their people and suppliers, and the commitment to cover wages of those unable to work will allow firms to retain many jobs if they are forced to reduce their operations.

“The government now needs to go foot-to-floor to ensure that details of the job retention scheme and loan guarantees reach firms on the ground as soon as possible. Given that this situation continues to evolve, ministers must also keep the door open to additional measures to support business cash flow.”