UK economy rebounds more slowly than expected
The UK economy grew just 1.8% from the previous month rebounding more slowly than expected after the gradual easing of Lockdown the BBC reported.
The office of National Statistics said the economy is in doldrums.
This is not to be unexpected as the economy has not returned to 100% with many industries running at reduced numbers. Many of our client’s report that business has never been better, but some specific industries are facing their toughest challenges ever.
The inevitable recession that seems to be on the horizon will be a strange one indeed, with some industries facing terrible consequences of COVID19 and some doing much better.
Job Retention Bonus
A recent major announcement by Rishi Sunak was the Job Retention Bonus. It is designed to encourage employers to bring back furloughed workers as the benefits of the Coronavirus Job Retention Scheme start to reduce.
The new Job Retention Bonus is a £1,000 payment to employers that bring back employees that were furloughed, under the stipulation that they are employed for at least 3 months after the furlough scheme ends.
Employees must be gainfully employed and be paid at least £520 a month, on average, from November 2020 to January 2021.
The payments will be made from February 2021. Further details about the Job Retention Bonus scheme are due to be published by the end of July.
Our view on this is that while this is a nice to have it probably won’t encourage an employer to keep someone, they would otherwise have to make redundant due to a downturn in business.
Ironically, where employers are making redundancies, I can see this money helping to pay redundancy costs of those workers let go.
Read the government’s plan for jobs here.
Temporary 5% VAT rate
HMRC has published new guidance for VAT registered businesses in the hospitality, holiday accommodation and attractions sectors. This new guidance follows the Chancellor’s announcement in the Summer Statement of a temporary reduction in the VAT rate from 20% to 5% from 15th July 2020 until 12th January 2021.
This means that until the 12th of January 2021, VAT charged on food, accommodation, and certain attractions (such as eat-in or takeaway food in restaurants, cafes and pubs, cinemas, theme parks and zoos) will be reduced to 5%.
All of our clients that have been affected by this change have been contacted by their Client Managers.
The Big Question is whether to pass this rate decrease on to customers?
Many businesses are not planning on doing this, although some are. The argument for not doing this is that capacity is reduced already, and this is a bonus to help the business survive – the ones that are going to pass it on are looking for positive PR form this.
Full Guidance can be seen here.
Temporary changes in Stamp Duty
The government has introduced a temporary increase to the relevant SDLT nil-rate bands for purchases of residential property to £500,000.
This will apply from 8 July 2020 until 31 March 2021.
It means that all individual purchasers of residential property who complete or substantially perform their purchase from 8 July 2020 until 31 March 2021 inclusive will pay less or no SDLT.
All companies buying residential property worth less than £500,000 will also benefit from the measure, as will companies that buy a residential property of any value where they meet the relief conditions from the corporate 15% SDLT charge.
Full details of this can be seen in HMRC’s stamp duty newsletter.
Aimed at those aged 16-24 who are in receipt of Universal Credit and deemed to be at long-term risk of unemployment, this scheme has been introduced to create high-quality 6-month work placements. Funding for each job will cover 100% of the relevant National Minimum Wage for 25 hours per week, plus the associated National Insurance and auto-enrolled pension costs.
There is a time limit to this scheme, as this will only be available for employers who apply between August 2020 and January 2021.
The idea behind this scheme is for employers to provide training and support to help the employee gain permanent work, or perhaps even take them on permanently themselves. The grant for this will be a maximum of around £6,500.
Boosting Worksearch, Skills and Apprenticeships
High-quality traineeships for young people will receive a cash injection, with the government funding employers with £1,000 per trainee whilst also expanding eligibility to those with level 3 and below qualifications, making this kind of work more inclusive and widespread.
Businesses hiring new apprentices will be rewarded with £2,000 to those employing apprentices under 25, and £1,500 to those employing apprentices over this age. This is in addition to the already existing £1,000 for those aged 16-18 or those with an education plan under 25.
This scheme is open from 1 August 2020 – 31 January 2021.
Eat Out to Help Out
To encourage people to return to eating out, as many people are still cautious about this, food outlets can register to participate in this scheme. What this scheme does is offer every diner a 50% discount on their bill in qualifying eateries, up to a maximum of £10 per head. This discount is available all day, Monday to Wednesday, from the 3rd – 31st August 2020. Participating establishments will be fully reimbursed for this by the government.
No voucher is required, and diners can use the discount as many times in a month as they like. The discount does not apply to alcoholic drinks, and there is no minimum spend.
The government are rolling out a search tool on the 20th of July to highlight participating establishments; you will be able to search to find participants within a 2-mile radius of where you are.
Who will pay for it?
These initiatives are thought to cost in the region of £30 billion, but it is anyone’s guess how these measures are going to be paid for. This is nowhere near a balanced budget, so watch this space. We do not doubt though that all of this and the measures in place will have to be paid for at some point.