The Chancellor’s summer statement: An extended lifeline to SMEs?

As SMEs and entrepreneurs continue to grapple with the fallout from COVID-19, we're seeing many businesses take action to weather the storm

The Chancellor’s summer statement: An extended lifeline to SMEs?

As SMEs and entrepreneurs continue to grapple with the fallout from COVID-19, we’re seeing many businesses take action to weather the storm, pivoting their products and services, and adapting operations in response to these challenging times. With the uncertain environment set to remain, they should consider whether any of the government support announced in July can provide an extended lifeline and get their business through the country’s recovery process. 

The measures announced in the Chancellor’s summer statement aimed to achieve one of two things – create stimulus to help the economy thrive again and maintain job retention where possible. The decision for the job retention scheme to co ame to an end will no doubt have important implications for many SMEs who will be forced to consider redundancies and reducing their headcount. While there is some flexibility for how business unwind their use of the furlough scheme, ultimately this was a huge lifeline for employment which is being taken away.

For some businesses that are able to take a longer-term view, the Coronavirus Job Retention Bonus Scheme may help to bridge the gap between income and costs and allow them to retain their employees. However, for those where their business model has been dramatically impacted and a hand-to-mouth approach has been adopted, this might not be enough of an incentive. Additionally, by its nature, the £1,000 bonus will help cash flow in the new year, and so SMEs will need to weigh up short-term costs versus the delay in reaping this cash benefit. 

The absence of any childcare measures may also restrict the ability of businesses to bring people back from furlough and could disproportionately impact our female workforce. As the furlough scheme ends, many women will find returning to work challenging without childcare provisions and this could further widen gender disparities. To address this, childcare providers, holiday clubs and childminders need to be supported through measures such the Northern Ireland childcare recovery support scheme, which opens for applications on 3 August.  

On the flip side, important developments including the ‘Kickstart’ youth jobs scheme and the government’s traineeship announcement, could provide SMEs with critical immediate cash for training and employment of young talent, and provide a good opportunity for SMEs to bring people onboard in a cost-effective way. The ‘Kickstart’ scheme represents a significant pledge from the government and it’s clear there is a strong desire for businesses to take this up as soon as possible. 

The schemes offers SMEs a viable way to harness young talent with the benefit of government support at a time where there are other strains on the business. SMEs should take the time explore and understand this measure to see if they can take advantage of it. This should involve thinking about the medium term and how they might continue to finance these jobs beyond the duration of the scheme, especially in the context of ongoing uncertainty and low business confidence.

As we look to the months ahead, there are areas of support that still need to be addressed and which could garner some attention in the Autumn Budget. As hopes of a ‘V’ shape recovery fades, it’s increasingly likely that we will see stimulus measures announced, in addition to more fundamental changes to the UK tax framework more broadly and government responses to ongoing consultations. Any extensions on measures from the summer statement will largely depend on how the economy continues to recover.

Since COVID-19 hit, SMEs have undergone a rapid evolution with priorities shifting overnight and changes made to how they conduct business. For some, this has been an opportunity to deeply reassess business models and operational costs, diversify their offering, and find new ways of delivering the same services. We continue to be impressed with their ability to respond in agile ways, with many entrepreneurial businesses remaining cautiously optimistic about how they’ve been able to pivot during this time. What will be key is finding a sensible balance between the cost of their workforce and doing right by their people while ensuring a continued ability to generate income. 

Victoria Price
Victoria Price

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