In today’s government update, the Chancellor, Rishi Sunak, set out a further raft of Coronavirus business support saying that the government would do whatever it takes to put interventions in place to assist businesses and individuals.
£330 billion pounds government backed loans for businesses needing access to cash
There will be a new Bank of England loan scheme for large businesses as part of £330 billion pounds government backed loans. £330 billion is roughly 15% of GDP but let’s not forget these are loans which will attract interest and have to be repaid. There is also an extension to the business interruption scheme loans for small businesses announced at the Budget which have been increased from £1.2m up to £5m with no interest for 6 months.
The problem for many businesses may not be access to loans however but the ability to pay them back in the future. If as has been suggested that it will take three months to get the Coronavirus under control and it’s expected to come back for the 2020/21 winter then loans may just pile up problems for the future when interest kicks in and capital needs to be repaid. It’s very possible that many businesses may simply decide to cease trading rather than take on more debt.
Retail, hospitality & leisure Coronavirus business support
For pubs, clubs, theatres the Chancellor stated that the government’s actions are sufficient to enable them to claim on their insurance business interruption insurance should they have it. Additionally, every business in retail, hospitality or leisure sector will pay no rates for 12 months plus there are cash grants for smaller businesses without insurance of up to £25k.
The aim of the Chancellor is to address two main fixed costs – rent and salaries, and to do this the waiving of business rates should roughly cover rent and grants should assist with salaries.
Support for people and individuals
The government say that they are strengthening support for people and individuals, announcing that for those in difficulty paying their mortgage, lenders will offer a three month mortgage holiday. This will increase mortgage payments in the future (and frankly mortgage holidays have always been looked on kindly by lenders in times of financial difficulty), but crucially provides no assistance for the millions of workers who rent. In the coming days the Chancellor says they will go much further working with trade unions and business groups to help protect people’s jobs and incomes through this period.
Potential support package for airports and airlines will be discussed in the coming days.
Overall, the assistance is targeted at retail, hospitality and leisure sectors but doesn’t address help for the self employed, freelancers, those already temporarily laid off (for example Virgin Atlantic employees who face two months unpaid leave) or those who are on zero hours contracts and may be out of work (such as janitorial staff, canteen workers and other ancillary staff) due to the businesses they normally work for being shut as everyone who can works from home.
These are only the first steps of what is already an enormous and unprecedented support package for businesses and Rishi Sunak will set out the next steps in his economic plan in next few days. He emphasised several times that the government will do whatever it takes. Self employed people are waiting…