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Rishi Sunak announces summer budget to “save jobs” and rescue UK’s economy: What does this mean for small and medium businesses?

Written by Latifa Yedroudj on Thursday, 09 July 2020. Posted in Politics, Analysis

The Chancellor has delivered his summer statement in the Commons unveiling a series of measures to help the UK economy recover from the coronavirus pandemic

The Chancellor has delivered his summer statement

The Chancellor has delivered his summer statement in the Commons unveiling a series of measures to help the UK economy recover from the coronavirus pandemic

Chancellor Rishi Sunak has announced a series of new measures to save jobs as part of a £30bn package to rescue the UK’s economy and help businesses bounce back from the coronavirus pandemic. 

In his mini-budget speech today, the Chancellor pledged to ‘protect, support and create’ jobs with a raft of new measures. Mr Sunak announced plans to cut VAT on food, accommodation and attractions from 20% to 5% from next Wednesday along with “eating out” vouchers. He also pledged various schemes to reward and incentivise employers who bring furloughed staff back, encourage companies to employ young workers and announced an immediate stamp duty holiday for six months on properties valued up to £500,000. 

The “Eat Out to Help Out” scheme will allow participating restaurants to offer 50 per cent discount on dining out from Monday to Wednesday throughout August, which would help protect 1.8 million jobs in Britain. The scheme hopes to encourage consumers to spend at pubs, restaurants and cafes. The government has also pledged to give businesses a £1000 ‘furlough’ bonus for every staff member kept on for three months after the furlough scheme ends in October. However, Mr Sunak rejected calls to extend the furlough scheme beyond October, saying it would give people ‘false hope’ they will have a job to return to and that skills could face overtime. Explaining how it will work, the chancellor said: "If you're an employer and you bring back someone who was furloughed - and continuously employ them through to January - we'll pay you a £1,000 bonus per employee. It's vital people aren't just returning for the sake of it - they need to be doing decent work. So for businesses to get the bonus, the employee must be paid at least £520 on average, in each month from November to the end of January - the equivalent of the lower earnings limit in National Insurance."  

The chancellor also announced a £2.1billion ‘kickstart scheme’ to help under 25s with the first step in their careers. The scheme will subsidise six-month work placements for people on Universal Credit aged between 16 and 24 who are at risk of long-term unemployment. The scheme will directly pay employers to create jobs for this group of individuals. Businesses will also be given £2,000 for each new apprentice they hire under the age of 25 as part of the jobs package. Investment in traineeships will total £111 million in the current financial year, three times the original scale.

“The Government has a vital role to play in supporting SMEs across the country, and so it’s great to see the Chancellor build on the support packages already in place to help Britain’s businesses through the global pandemic,” Chirag Shah, CEO, Nucleus Commercial Finance said. "The hospitality and tourism sectors are crucial in providing jobs to millions of workers and contributing to national GDP. Today’s announcement of a VAT cut for these sectors will be welcome news to business owners, allowing them to reopen and providing them with much needed clarity and funding to navigate these uncertain waters.” 

Mike Cherry, National Chairman of the Federation of Small Businesses (FSB) applauded Sunak’s ‘jobs first approach’ but voiced concerns about whether these new measures can apply to SMEs, who make the backbone of Britain’s economy. "The key now is making sure these positive new measures work for all, especially the small firms that make-up 99% of our business community and employ 17 million people,” he said. “The job retention bonus must be easy to access. We can’t have paperwork holding up this vital support. We pushed for incentives to take on apprenticeships and it’s good to see those delivered today. The funding and subsidies for apprenticeships, kickstart roles and traineeships also need to be accessible. Young people are looking for work now. 

“A VAT cut for food, accommodation and attraction businesses alongside the ‘eat out to help out’ initiative marks a critical step forward. We look forward to collaborating with policymakers on the latter to ensure that those who are deserving don’t miss out. The Treasury should now assess how it can build on this progress, taking another look at our regressive business rates system once we get to the autumn.” 

He added: “We need the government to spell out how it will help the newly self-employed and company directors who have once again been overlooked this afternoon,” he said. “We need the Government to spell out how it will help the newly self-employed and company directors who have once again been overlooked this afternoon, and have now been left without help for more than 100 days during this incredibly difficult period.”

The new incentives are a step in the right direction to bringing the UK’s economy back on its two feet and business leaders have welcomed the measures with open arms. However, the government has failed to explain how small businesses and the self-employed, who form the backbone of Britain’s economy, can benefit from the rescue package. As lockdown measures ease and businesses kickstart their operations, the government must continue to support and review the current incentives later on in the year to keep the momentum going.

About the Author

Latifa Yedroudj

Latifa Yedroudj

Latifa Yedroudj has joined the Elite team to fully immerse herself in the business side of journalism, a strong passion of hers cultivated from young having co-run her mother's start up business since she was 18. Her interests lie in a wide range of subjects, including start ups, business, travel, and anything entrepreneurial she can get her hands on. She has worked for some of the biggest names in journalism including The Guardian and The Mirror. Follow her on @latifayed on Twitter for her latest journo rants.

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