The Chancellor’s Winter Economy Plan – And Our response

Earlier this week, Chancellor, Rishi Sunak, announced new measures in his Winter Economy plan, the next phase in the Government’s support for businesses and the economy.

Key announcements include a new Jobs Support Scheme, extending the Self Employment Income Support Scheme and a 15% VAT cut for the hospitality and tourism sectors until March 2021, plus help for businesses in repaying government-backed loans.

Dan Jarvis, Mayor of the Sheffield City Region, said: “The Chancellor is right to take action on jobs and businesses facing a cliff edge at the end of furlough. However, the announcement only offered temporary respite for existing jobs and businesses at risk, and there was nothing to support industries who remain closed thanks to COVID.

“What we need to see is a long-term plan for renewal, investing in regions like South Yorkshire and unleash our potential and create a new generation of jobs and prosperity. We need the Chancellor to support the renewal of our economy, not just its rescue. That means backing our ambitious and wide-ranging Renewal Action Plan in the Comprehensive Spending Review.

“The Chancellor shouldn’t risk trying to drive the recovery from Westminster, when we know mayors and regional leaders are best placed to deliver a jobs-led recovery and level up the economy. That means giving us the resources and powers needed to get on with the job and build a stronger, greener and fairer South Yorkshire.”

In response to the Chancellor Rishi Sunak MP announcing a new round of support for businesses during the coronavirus pandemic, Local Enterprise Partnership Chair James Muir said:

“The support packages announced by the Chancellor will help to protect jobs and businesses in the short term but there must also be a focus on supporting employers who are able to generate jobs or training opportunities in the years beyond the pandemic. South Yorkshire has this potential in abundance, and now we need to see Government match our ambitions and unlock a new era of jobs, businesses and prosperity for our region and the Northern Powerhouse.

“Mayor Jarvis and I are calling on the Government to back our £1.7 billion plan for not just recovery, but renewal, which will grow a stronger, greener and fairer economy for South Yorkshire. To do this we will be leading a jobs-based recovery but Government must support us in this by providing the tools needed to nurture growing businesses.”

Key points from the Winter Economy Plan include:

Tax cuts and deferrals

  • The VAT reduction from 20% to 5% for the hospitality and tourism sectors will be extended until the end of March 2021.
  • Businesses who deferred their VAT will no longer have to pay a lump sum at the end of March next year. They will have the option of splitting it into smaller, interest free payments over the course of 11 months next financial year.
  • Self-assessed income tax payers who need extra help can now benefit from a 12-month extension on the “Time to Pay” self-service facility, meaning payments deferred from July 2020, and those due in January 2021, will now not need to be paid until January 2022.

New Jobs Support Scheme

The furlough scheme will not be extended. Instead a new six-month Jobs Support Scheme will start in November:

  • The Government will directly support the wages of people in viable work. Businesses facing reduced demand can avoid making employees redundant by keeping them on shorter hours.
  • The employee will work at least a third of their normal hours paid by the employer
  • For the hours not worked, the government and the employer will each pay one third of their equivalent salary.
  • The level of grant will be calculated based on employee’s usual salary, capped at £697.92 per month.
  • All SMEs are eligible for the scheme, but larger firms can apply too if their turnover is affected by coronavirus.
  • Employers that are retaining furlough staff on shorter hours can claim both the Job Support Scheme and the Jobs Retention bonus.

Self-Employment Income Support Scheme Grant (SEISS)

  • SEISS will be extended on similar terms as the new Job Support Scheme.
  • An initial taxable grant will be provided to those who are currently eligible for SEISS and are continuing to actively trade but face reduced demand due to coronavirus.
  • The initial lump sum will cover three months’ worth of profits for the period from November to the end of January 2021, worth 20% of average monthly profits, up to a total of £1,875.
  • An additional second grant to cover the period from February 2021 to the end of April – this may be adjusted to respond to changing circumstances.

Government-backed loans

A new Pay as you Grow repayment system will provide flexibility for firms repaying a Bounce Back Loan. This includes:

  • Extending repayments from 6 to 10 years.
  • Interest-only payments.
  • Suspending repayments for up to 6 months if needed.

Credit ratings won’t be affected.

The Government has said it intends to give Coronavirus Business Interruption Loan Scheme lenders the ability to extend the length of loans from a maximum of six years to ten years if it will help businesses to repay the loan.

The application deadline for all coronavirus loan schemes – including the future fund – has been extended to 30 November.

Any business located in Sheffield City Region that is looking to re-establish or recover after making significant losses due to the Coronavirus lockdown, or that is facing challenges that put its long term future in question, please speak to the Sheffield City Region Growth Hub team about the Re-Start to Growth or Re-Start to Growth+ packages.