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Sunak Increases Coronavirus Support for U.K. Businesses 

Posted on Oct. 23, 2020

Chancellor of the Exchequer Rishi Sunak has announced increased grants under the United Kingdom’s coronavirus support schemes and government funding for local authority cash grants to hospitality businesses affected by restrictions in high-alert-level areas.

In an October 22 statement to members of Parliament, Sunak said he understood the frustration of people in Liverpool, Greater Manchester, and other areas facing tighter public health restrictions. “People need to know that this is not forever; these are temporary restrictions to help control the spread of the virus. . . . We have an economic plan that will protect the jobs and livelihoods of the British people, wherever they live and whatever their situation,” he said.

Job Support Scheme

The job support scheme (JSS) will take effect from November 1, replacing the coronavirus job retention scheme, through which HM Revenue & Customs has paid grants to employers to cover 80 percent — reduced to 70 percent in September and 60 percent in October — of a furloughed employee’s wages.

Sunak unveiled the JSS, designed for employers retaining furloughed staff on shorter hours, as part of his “winter economy plan” on September 24. He warned that a resurgence of the virus meant that the U.K. economy would likely undergo a “more permanent adjustment,” with sources of economic growth and jobs evolving to “the new normal.” It would be wrong to hold people in jobs that “only exist inside the furlough,” he said, adding that the government needed to support people in viable jobs that provide “genuine security.”

The original terms of the JSS required an employee to work at least a third of their normal hours and be paid for that work by their employer. The employee would then receive payment (subject to a cap) equal to two-thirds of their wages for the time not worked, with the cost shared between the employer and the government.

Sunak announced on October 9 a furlough scheme for businesses legally required to close their premises because of restrictions set by one or more of the four governments of the United Kingdom. The scheme was presented as an extension of the JSS. The government would pay two-thirds of each furloughed employee’s salary up to a maximum of £2,100 a month, he said. But Kate Nicholls, chief executive of the trade group UK Hospitality, said that scheme would do nothing to address issues faced by hospitality-sector businesses remaining open but “operating well below capacity due to restrictions and consumers avoiding travel.”

Sunak’s October 22 announcement reduces the employer contribution to the unworked hours for an employee retained on a part-time basis “to just 5 percent, and reduces the minimum hours requirement to 20 percent, so those working just one day a week will be eligible,” HM Treasury said in a statement. “The government will provide up to 61.67 percent of wages for hours not worked, up to £1541.75 per month (more than doubling the maximum payment of £697.92 under the previous rules),” it added.

There is no change to the support for businesses legally required to close.

HMRC published updated guidance on the JSS later on October 22. 

Self-Employment Income Support

Grants for the self-employed will be “doubled to 40 percent of previous earnings,” Treasury said.

The self-employment income support scheme (SEISS) “grant extension” announced on September 24 provides two taxable grants for the three-month periods of November 2020 to January 2021 and February 2021 to April 2021. An HMRC guidance note updated on October 22 said the first grant will cover “40 percent of average monthly trading profits, paid out in a single installment covering three months’ worth of profits, and capped at £3,750 in total.” The government will “review the level of the second grant and set this in due course,” HMRC said.

Local Authority Grants

“We are providing additional funding to allow local authorities to support businesses in high-alert level areas which are not legally closed, but which are severely impacted by the restrictions on socializing. The funding local authorities will receive will be based on the number of hospitality, hotel, B&B, and leisure businesses in their area,” the Treasury statement said.

“Businesses in very high alert level areas will qualify for greater support whether closed (up to £3,000 a month) or open. In the latter case, support is being provided through business support packages provided to local authorities as they move into the alert level,” Treasury added.

‘Significant Improvement’

The British Chambers of Commerce welcomed Sunak’s announcement. “This is a very significant improvement in the support available to businesses struggling with the impact of increasing restrictions across the U.K. Chambers have been campaigning for greater support for businesses experiencing big falls in demand as a result of new restrictions, and a number of the steps announced today, including the lowering of employer contributions and the number of hours worked needed to qualify for the scheme, respond directly to our calls,” it said.

“At a time of immense struggle for many small businesses, these interventions will help to protect jobs, businesses, and livelihoods. The chancellor has shown a willingness to be flexible and adapt interventions as the second wave of the virus escalates," Federation of Small Businesses National Chair Mike Cherry said in a statement.

The extension of the JSS will help “small firms in all tiers of restrictions and businesses in all sectors,” Cherry said. “The upgraded support for the self-employed is vital to helping those individuals, but as with all previous support packages, there are still many who have been left behind.”

Cherry said those excluded from income support, “especially company directors and those newly self-employed,” are now facing “a significant depression in trade” caused by the new restrictions. “They deserve to be part of this package of new support but have once again been ignored, [and] the chancellor should do all he can to address these shortcomings,” he added.

“The exclusion of small company directors, a major part of the dynamic entrepreneurial heart of our economy, from key support schemes becomes all the more pressing as the virus wears on. It’s deeply frustrating that this issue still hasn’t been addressed,” said Jonathan Geldart, director general of the Institute of Directors.

‘Sharp Fall’ in Number of Self-Employed

The Association of Independent Professionals and the Self-Employed welcomed the increase in the SEISS grants, but it said there are still “deep structural problems” in the system.

“A third of the self-employed — including sole directors of limited companies and the newly self-employed — are still completely excluded from SEISS (and the proportion is even higher in the hospitality sector). This is an enormous omission and it is deeply troubling that the government has not addressed this,” Derek Cribb, the association's chief executive, said.

“The gaps in the support have already led to the biggest drop in the number of self-employed on record — over 250,000 since the beginning of the year. With large parts of the country locking down again, this is only set to worsen as many forgotten freelancers face financial devastation. The government must act now and open up SEISS or other targeted support to these groups,” Cribb added.

The Office for National Statistics (ONS) said in an October 13 release that a “sharp fall” in the number of self-employed workers was not reflected in the number of employees.

Estimates for June to August, based on the ONS’s labor force survey, show that “there were 4.56 million self-employed people (14.0 percent of all people in employment), 240,000 fewer than the previous quarter.” There were “a record 27.9 million employees . . . 92,000 more than the previous quarter,” the ONS said.

But the ONS noted that employment status is “self-reported” for the survey. “Previous analysis indicates that some of the fall in self-employment comes from an increase in the number of people who had changed to classifying themselves as an employee, even though they have not changed jobs,” it said.

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