Marketing manager at Satago
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Government support and the second wave

As we brace for a second wave of Covid-19, businesses up and down the country are grappling with the threat of a new lockdown. Satago’s Tilly Michelle looks at what the new government support could mean for businesses.

25th Sep 2020
Marketing manager at Satago
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Chancellor of the Exchequer Rishi Sunak leaving for PMQs.Chancellor of the Exchequer Rishi Sunak leaving Number 11 for the first PMQs after the summer recess.Picture by Andrew Parsons / No 10 Downing Street.

Earlier this week, stocks plummeted amid fears of a return to the restrictions that we saw in March, when the hospitality and travel industries ground to halt and only essential retailers remained open for business. 

However, back then we were dealing with an unprecedented situation. Now, armed with a better understanding of the virus, more effective PPI and precautionary measures, there is reason to hope that we are better placed to handle this situation than we were in spring. 

Government loan schemes 

On Monday, the Prime Minister introduced a 10pm curfew on restaurants and pubs, sending shock waves through the hospitality industry. According to a Guardian survey, 23% of pubs, bars and restaurants fear collapse within three months without Government intervention. 

On Thursday, the Chancellor announced a set of measures to protect businesses and jobs during this period, including the extension of loan scheme application deadlines to 30 November for:

  • Coronavirus Business Interruption Loan Scheme (CBILS)
  • Coronavirus Large Business Interruption Loan Scheme (CLBILS)
  • Bounce Back Loan Scheme (BBLS) 
  • Future Fund 

Lenders can now extend loan lengths to up to ten years for CBILS and BBLS if it will help businesses to repay the loan. Interest-only periods of up to six months and payment holidays will also be available to businesses. 

In addition, the furlough scheme will be replaced by a new job support scheme and another self-employed income support grant scheme will be introduced. Further deferrals of tax payments and a continuation of the 5% VAT for the hospitality sector will also be offered by the government.

Furlough, SEISS and VAT

Under the new furlough measures, the government will subsidise one third of the wage of employees who have had their hours cut due to coronavirus. The grant is capped at £697.92 per month and, in order to claim, employees must work at least a third of their hours. 

The scheme is designed to encourage businesses to keep their staff on reduced hours, rather than cutting jobs.

Whilst these initiatives have been welcomed by businesses, they are short term solutions. We will need to wait until January for the Chancellor to announce a replacement for CBILS and BBLS, and most workers can only survive on reduced wages for a short period of time.   

Effect on businesses

Whilst the 10pm curfew poses a threat to the hospitality industry; the government is clearly reluctant to impose another full lockdown. 

Over the past few months, many industries have undergone radical changes in order to keep customers and staff safe. From hairdressers wearing protective clothing and taking customer’s temperatures on arrival, to pubs opening outdoor areas and introducing table service, businesses have been quick to adapt. 

Early indications have shown that these safety measures, along with the adoption of masks by the general public and track and trace procedures, worked. If that continues to be the case, we can hope that most businesses will be able to continue operating with caution, protecting the livelihoods of their staff. 

However, the unpredictable nature of this situation will leave many business owners feeling anxious. The uncertainty is somewhat frustrating, particularly as this second wave of the virus has not come as a surprise to the government.

A question of finance

Without the assurance that their business will remain open in the coming months, some will be reluctant to take on finance at all, which could dramatically slow economic recovery. 

For businesses to bounce back, we need an economic plan that extends further into the future than a couple of months.

In addition, we must learn from the mistakes that drastically affected secondary industries this summer. According to the Federation of Small Businesses (FSB) 62% of SMEs experienced late or frozen payments as a result of Covid-19. 

The Government must renew its commitment to supporting prompt payment practices across public and private sectors in order to protect suppliers during these challenging times. 

In the meantime, businesses must do everything they can to protect their cashflow through a better understanding of risk, credit control and the financial solutions available to them.

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