Chancellor delivers Bonanza of aid measures
Wednesday, 18 March 2020
Last night Rishi Sunak, the Chancellor, arguably went further than any peace time Chancellor before him, in the support he announced for the economy.
On top of the measures already outlined in last week’s Budget, he announced a mixture of tax cuts, loans and cash grants for business, in an unprecedented package of £350 billion of Government support for businesses and individuals.
Firstly, and most importantly for our smallest businesses, there was an increase in the cash grant available for small businesses eligible for Small Business Rate Relief from £3,000 to £10,000. In addition, all retail, hospitality and leisure businesses with a rateable value in excess of £15,000 and below £51,000, will be eligible for cash grants of up to £25,000.
In a further boost to all businesses in that troubled sector, there will be a business rates holiday for 12 months, no matter how large or small your business, in an extension of the previously announced Budget measures.
The Budget announced the Coronavirus Business Interruption Loan Scheme for small and medium sized businesses (SMEs) and this was extended last night from a loan of £1.2 million to £5 million. These are loans on interest free terms for six months moving to ‘beneficial’ interest rates after that period. The Chancellor was quite clear that this is to be used to pay wages, buy stock, pay suppliers; a real parachute for all SMEs struggling to survive this difficult period.
For larger businesses that raise money on the debt markets, by selling debentures and other forms of commercial paper, there is a new lending facility with the Bank of England, enabling them to continue to raise the funds they need with lending backed by the Old Lady. This loan scheme is trailed as offering unlimited financing to eligible businesses.
These loans should be available from Monday 23 March, so we should know more in the coming days.
For hard pressed homeowners, there was also a promise that all mortgage lenders will offer a three month payment holiday to those customers experiencing issues with their finances, to enable sufficient time for recovery. However, although there will be a fast-track system of approval, not everyone will be granted the payment holiday, and the unpaid interest will be recovered later; a detail the Chancellor omitted to mention.
So far so good, you might think, but, as always, the devil is in the detail and it’s detail we don’t have. There are some weasel words in the announcements ‘up to’ £25,000 of grants; ‘beneficial interest rates’ after the six month interest free period; ‘eligible businesses’; but let’s hope that the Government’s largesse is real and the cash is easily accessible, as any significant delays will make these measures too little too late for a large number of businesses.
There are some gaps in the Government’s response, for example, no relief from Council Tax; no help for those with rent to pay; no specific help for the self-employed. But these may come as the crisis deepens.
There is the view that this first tranche of measures is a down-payment, and with the pandemic and economic news worsening every day, it might have to be just that with further measures to follow.
The only detail we have so far, can be found in these links to the HM Treasury website, and we will keep you posted with further updates as we receive them.
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Partner Richard Proctor
This article was originally published by MHA Monahans