With attention fully focused on the Coronavirus outbreak in the UK, Chancellor Rishi Sunak’s first budget means huge impacts on benefits, tax and, broadly, the UK economy. But just how will it affect your business?
Arguably the most impactful budget announcement for small businesses ever, we’ve gathered the key takeaways you need to know when you’re running a business, as well as how other small UK businesses have responded to this financial update.
Key Takeaways from the New Budget for Small Businesses
Up to £330bn in Loans
The government’s latest financial package being used to shore up the UK economy against the impact of Coronavirus includes £330bn in loans, £20bn in other aid along with a business rates holiday across the retail sector (more on this further down!).
The Chancellor has also promised that if this package is not enough, he would go further.
Government to Pay Up to 80% of Workers' Wages
The government will pay the wages of employees unable to work due to the coronavirus pandemic, in a radical move aimed at protecting people's jobs.
It will pay 80% of salary for staff who are kept on by their employer, covering wages of up to £2,500 a month.
Tax Cuts for Millions
One of the key promises in the Conservative manifesto regards a tax break in National Insurance, which you used to have to pay when you started earning £8,632. This threshold will rise to £9,500 from April, meaning 500,000 people will no longer have to pay this tax.
Taxes will also be cut on digital books, newspapers and magazines.
Changes to Statutory Sick Pay
The Chancellor also announced that all those who have been advised to self-isolate, even if they don’t show symptoms, should receive statutory sick pay if eligible
UK employees get statutory sick day from the first day off work to help contain coronavirus, which is currently payed by employees. However, this will change in April so that small businesses with 250 employees or less can reclaim the cost of paying sick pay for the first 14 days of isolation.
Employment and Support Allowance for the Self-Employed
If you’re not eligible for sick pay, for example if you are self-employed, you’ll be able to claim Employment and Support Allowance (ESA) from day 1 of being sick instead of day 8.
To claim this, you must meet certain conditions, meaning the change is unlikely to affect many people. ESA is worth £73.10 a week, or £57.90 for the under-25s.
Business Rates Abolished in Retail, Leisure and Hospitality Sectors
The Chancellor has also said that tens of thousands of England’s retail, leisure and hospitality firms will not pay any business rates in the next year.
To be eligible for this tax holiday, businesses in those industries must have a rateable value of less than £51,000. Mr Sunak said, “This is a tax cut worth over £1bn, saving each business up to £25,000”.
Businesses in this industry with a rateable value of £15,000-£510,000 have also been promised grant funding of £25,000.
Support for Businesses Who Pay Little or No Business Rates
The government has promised to provide an additional £2.2 billion funding for local authorities to support businesses that already eligible for Small Business Rate Relief, which will provide a one-off £10,000 grant to help meet ongoing costs.
Coronavirus Business Interruption Loan
A new temporary Coronavirus Business Interruption Loan Scheme will launch in the coming weeks, delivered by the British Business Bank. The Scheme will support loans of up to £1.2 million and the government will provide lenders with a guarantee of 80% on each loan to give lenders further confidence in investing in small businesses – with no charge to business or banks for this guarantee.
For more information, please see the government’s official advice and information for small business owners here.
How is This Currently Affecting Small Business Owners?
We reached out to small business owners in the UK to ask for their reaction to the latest financial news regarding the Coronavirus outbreak, including how it’s going to affect their business and whether they believe that the government has done enough. Here’s what they had to say.
Rebecca Brennan-Brown, Owner of The New Black Studio
I own The New Black Studio, a corporate event management business which started in May 2019. We had a perfect start, with a good amount of business flowing and being able to expand the team, but [the COVID-19 situation] has obviously caused a hit. I also plan around 12 weddings a year, so have had a good overall view on the effects to the industry.
I believe the corporate events industry was one of the first to see the impact. We received our first cancellation in January, so we have been dealing with this for a while now. It’s been a true rollercoaster. By the first week of March, we’d lost every corporate booking from March-June, which has a significant impact on not only the cash flow of the business, but the mental health of all those involved. Not being able to see events you’ve worked on for a year come to life is heart-breaking.
However, I now feel we have very much turned a corner. We have come to terms with the loss of business, and have accepted the situation as it is. We’re trying to remain positive and give ourselves the best chance of bouncing back, but still allowing our team to just feel the way they feel, whether that be apprehensive, fearful, frustrated, and so on. We’re coping by taking the pressure off. We’re trying to find other ways of looking for job satisfaction, and using the time to slow down. Our industry is so fast paced that we’re using the slowdown to our advantage.
With regards to the budget, as a business owner I’m completely torn. This outbreak has completely destroyed any plans for growth in my business this year, but it has done exactly the same for so many others. I would welcome support of course, however I’d much rather that financial support was given to the NHS to help cope with this crisis. I can cope with eating beans for a while!
Didier Penine, Director of Say it with Champers
Temporarily abolishing business rates for firms with a rateable value below £51,000, as well as supporting companies with employees’ sick pay and increasing the employment allowance could all be of benefit as I look to grow my business.
There is a fine line between taking the plunge and taking on larger premises and a member of staff to help, and weighing up the costs of doing so and the associated risk. Such actions may well give me the confidence to grow and take on assistance which would allow myself to focus on more sales related-avenues.
I can see that COVID-19 is having a dramatic effect on face-to-face businesses such as shops, pubs and theatres and so on. Initially, being an online-only business, my feeling was that the effects may not be so severe for myself. However, the main aspect to my business is the corporate side which accounts for about 80% of my turnover; we offer a service where businesses commission a bespoke Champagne label design around their company branding and use it as a corporate gift.
My largest customer orders approximately 40 of these a month to reward loyal customers. Typically, I will be tagged on social media with their staff member shaking hands with the recipient and handing over the bottle of bubbly. The last order was due on 14th March, however due to the physical nature of this process and advice not to leave home if at all necessary, this has resulted in my order being delayed. Clearly 40 bottles and it being my largest customer has an immediate effect.
I also provide the Man of the Match and Player of the Month Champagne for Falkirk FC. With sport being suspended that is another high-profile customer that I cannot provide to. If all of this leads to a recession which it appears it will do, Champagne being the drink of celebration may well be less in demand during times of hardship. The Coronavirus will affect many businesses, both online and offline, and businesses everywhere will be wanting a positive outcome to all of this, however doing that will be easier said than done.
Rebecca Newenham Founder and Director of Get Ahead VA
The Budget measures announced last week such as the Business Interruption Loan Scheme, suspending business rates and funding the cost of statutory sick pay will be a big benefit to some small businesses. But not all will qualify for help and some vulnerable small businesses and organisations are not being supported.
The government, as well as the world, is facing an unprecedented challenge. We all need to try and support each other through these difficult times. We are sharing our knowledge of home working and helping clients to adapt where they can.
Simon Roderick, Managing Director of Fram Search
I run a boutique recruitment business working with financial services professionals. We have the ability to work from home, as do many of our clients, but this adjustment has created a bit of a slowdown. The budget was big on headlines and light on detail, and within a week out of date.
Gina Watts, Davis Hornsby Property
We buy up tatty houses in the UK, and then either sell on or rent out, with the aim of supplementing our pensions.
The budget not removing the 3% stamp tax levy on second homes was a disappointment, so house prices need to come down in order to make future purchases attractive. Recent events are bringing prices down, in my opinion and my observation from talking to people today. Quickly followed by the announcement from the Bank of England that interest rate was to be cut, with a new base rate of 0.25% is exciting. It means those competing for what little interest on loan money is out there, are highly likely to bring out new mortgage products at attractive low rates, for both buy to let landlords and first time buyers.
With Boris Johnson's directive yesterday (Monday 16/3) that all over 70s should self isolate, avoid unnecessary travel and avoid people, I am expecting to see those properties on the market for sale, see far fewer prospective buyers. A high proportion of the buy to let landlord market are over 70, with similar pension needs to us. Whilst those whose confidence is knocked, I see more opportunities and house prices falling, over the next 6 months.
When we are ready (have acquired) a property to set about the refurbishment, I find that the 4 stages, each no more than 5 steps that I wrote about in my book, stand me in good stead. Using the tried and tested process, I almost always complete my projects on time, on budget and to my standards. As
I can do a lot of the work myself, Covid19 has little impact on the business.
We are British. We plan ahead and I think we will weather this storm, although the road may be challenging.
Dhruvin Patel, Optometrist & Founder of Ocushield
As predominantly an e-commerce business selling consumer electronic accessories which limit blue light from digital devices, we've seen sales drop due to customers holding cash and buying essential goods only. I do see this bouncing back I hope in the near future as our customer demographic is largely made from businesses or individuals who do have reserve funds. Although, our costs have increased due to air freight becoming more expensive due to less commercial flights in the sky and retailers still ordering a significant amount of goods from the far east. Therefore, planes are currently full and space is limited.
We are also concerned our fulfilment centre may have to close if the UK imposes a lockdown soon so customers may not be able to get their goods. We've already seen one of our key partners who sell Ocushield products through Amazon not allowing any more stock to be unbounded (since 17th March) unless it’s essential items like household goods. This restriction is on until April 5th and may be extended.
The government's response has been positive; it's reassuring to see they're making cash available and it seems the support they provide will continue to be changed and updated as the COVID-19 situation unfolds. The execution speed of the grants and loans is the main barrier at hand which is impacting us as we are unsure how long it will take for funds to be in our bank account to help with cash flow issues. I am optimistic and do have faith in the government to support SMEs and the economy accordingly.
Kate Tompsett, Happy Glorious
I think that it is positive that the government is taking businesses into account when tackling this unprecedented challenge. As little as three weeks of enforced closure would be enough for me to fall behind on rent and bills, and I know that this is not unusual for small retail businesses. Once we are through the other side of the virus, there need to be systems put in place to ensure that we can get back to normal as quickly as possible and the grants and rate relief will help with this. Information has been limited on how to claim, and naturally the helplines were busy as soon as the number was publicised, but I am, on the whole, pleased that measures are being taken.