Economic update reveals new schemes to support employment in the UK
The latest Economic Update Statement from Rishi Sunak today has detailed a new scheme to replace furlough, as well as further funding and cash flow support for UK businesses.
Unveiling the latest plans, Mr. Sunak spoke of the importance of creating new opportunities that would translate to viable, secure jobs and allow the economy to move forward.
He highlighted some of the key challenges that businesses are now facing, including uncertainty and a reduced demand for services, particularly coming into the winter months.
Job Support Scheme announced
As a replacement for the furlough scheme, which comes to an end next month, the Jobs Support Scheme has been announced, which will contribute to the wages of people who are back in work.
This new scheme will aim to support viable jobs by supplementing the wages of employees who have returned to work for at least 1/3 of their normal hours. For the hours they do work, they will be paid as normal by their employer.
The remainder of their wages (up to 2/3 of their total salary) will be split, with the government and the employer each paying a further 1/3 of the remaining amount.
Under this scheme employees working 33% of their normal hours will receive at least 77% of their total salary.
The scheme will be open to all small and medium businesses in the UK, regardless of whether or not they have previously used the furlough scheme, as well as larger business who can show that their turnover has fallen during the crisis.
Cash flow support
As well as the new scheme to protect jobs, Sunak also announced several measures to help support business with their cash flow challenges.
He has announced a ‘Pay as you grow’ scheme for any business using Bounce Back Loans, which will allow them to extend their maximum repayment term from 6 to 10 years, as well as to make interest only payments or suspend payments for up to 6 months if they face difficult periods. This will not affect businesses credit ratings.
He has also extended the government guarantee offered with the Coronavirus Business Interruption Loan Scheme to 10 years, to ensure that lenders feel secure in approving loans. Further measures have been put in place to prevent businesses being hit with a large bill from their deferred VAT. The bill can now be broken down into 11 payments with no interest added.
Finally, support was announced for two of the hardest hit sectors of the pandemic, hospitality and tourism. While VAT rates were due to increase from 5% up to 10% at the end of January next year, this increase has now been delayed until the 31st March.
Do you think the new measures will be enough to support businesses over the coming months? We’d love to hear your thoughts in the comments below.