News & Insights
The Chancellor of the Exchequer, Rishi Sunak, has outlined the government’s plans for the UK’s businesses and economy in The Budget.
In what has been the most financially challenging period since the Second World War, the 2021 Budget has become one of the most highly anticipated government announcements of the pandemic. Businesses required more than £270 billion of support last year and have eagerly awaited the Chancellor to provide further clarity surrounding any future assistance.
In the day leading up to his announcement in the House of Commons, the Chancellor had hinted at an array of new and continuing measures, including the extension of the furlough scheme.
The scheme, first introduced in March last year, offers businesses financial relief by paying up to 80% of staff wages, up to a maximum of £2,500 per month per individual, when they are unable to work.
Whilst nearly 9 million employees, the majority from the retail and hospitality sectors, were positioned under the scheme at its inception, the need for it has fluctuated as businesses have opened and closed due to lifted and reimposed restrictions.
Acknowledging that over 700,000 jobs had been lost during the pandemic and over 150,000 businesses in hospitality and retail had been significantly impacted, the Chancellor announced that his priority is to “protect, create and support jobs” with The Budget, officially confirming the furlough scheme’s extension until the end of September.
Businesses would also be asked to contribute to the government’s wage coverage after July if they are in a fit position to do so, effectively reducing the risk surrounding the payment of staff as they ease back into operation after opening in April and May under the ‘roadmap to recovery’.
The Chancellor announced that £5 billion of aid will be available would be included in The Budget to support the re-opening of high street businesses in the near future.
Non-essential high street businesses, who can open their doors on 12th April, can obtain grants of up to £6,000 whilst those in the hospitality sector who can operate indoors from 17th May can receive up to £18,000.
These funds will also coincide with the extension of business recovery loans, which range from £25,000 to £10 million. These are now available until the end of the year and 80% of the value will be backed by the government.
Furthermore, the existing business rates holiday has been extended until the end of June, when it is hoped any pandemic restriction will be lifted. Businesses from the hospitality, leisure and retail sectors, who qualified for rates relief through 2020, will then be eligible to pay only a third of business rates normally owed for the remainder of the year.
This initiative has already been met with indignation for not going far enough to support struggling retailers. Some commentators have stated that ‘there is a deep wound in the system…and it can’t be plastered over’ and ‘three months [of total rates relief] will represent little more than a stay of execution for many firms’.
The Budget also highlighted how pubs, restaurants and cafes will continue to benefit from the reduced 5% VAT rate for hospitality and tourism which has been extended until the end of September. There will then be a stepped increase to 12.5% for a further six months, before returning to the normal 20% in April 2022.
Alcohol duty tax will also remain frozen to help licensed businesses and to attract more customers once it is safe to do so.
Theatres and entertainment venues will also receive a portion of a £400 million package designed to support these businesses in re-opening their doors.
However, many believe this to be too little, too late, for industries that have been hit hardest throughout the pandemic.
The areas of taxation and rebuilding public finances were hot topics leading up to the Budget. Indeed, many worried that changes to income tax thresholds may see employees take home a reduced pay.
However, Sunak announced that there would be no change to income tax. Instead, he set out an increase in corporation tax from 19% to 25%, for corporations with profits of £250,000 or more, which will come into effect in April 2023.
Firms with profits of £50,000 or less, which number around 1.4 million, would continue to pay a 19% tax rate indefinitely and businesses that sit between these two brackets will see the rate taper depending on the amount of their profits.
To prompt further business investment and to kickstart the economy, the Chancellor promised to reduce individual corporation tax on profits in a “super deduction” if businesses were willing to put money into smaller firms.
Additionally, the Help to Grow scheme comes into effect in Autumn and would see the government contribute up to 90% of costs required to fund company management software and up to 50% of costs required to fund better digital skills for SMEs.
As the pandemic began to take hold towards the end of March 2020, the Chancellor promised he would do “whatever it takes” to support the country’s economy in what was believed to be a temporary set of measures. This year, he reiterated this statement by looking to continue schemes and reimplement initiatives which have helped to secure the nation’s economic survival.
Commercial tenants now await more news about key areas of support that have yet to be addressed by the government, chiefly the extension of the eviction moratorium.