As the Government winds up its various coronavirus support schemes we look at what’s changing, what’s still available and other ways to manage your business’s cashflow in these tough times.
Lockdown has been loosening for a few months now but with social distancing rules still in place, and consumers understandably nervous, we’re still a long way off business as usual.
Places like shops, hairdressers and cafes are only able to handle a reduced number of visitors, which in turn reduces their ability to generate income.
And that’s before we talk about local lockdowns – either complete, like in Leicester, or partial like the one we’ve been faced with in Greater Manchester and in places like Rochdale and Oldham in recent weeks.
Big chains such as Marks & Spencer announcing 7,000 redundancies gives an indication of how tricky things might get in the coming months as what is now officially a recession starts to bite.
No more furlough safety net
Despite ongoing economic challenges the Government is determined to wind up its popular coronavirus jobs retention scheme (CJRS), popularly known as just ‘furlough’.
Your last chance to apply for the scheme was on 31 July and from the start of this month, the level of support on offer has begun to taper off.
From 1 August, the Government will pay 80% of wages up to £2,500 for the hours an employee is on furlough, and you’ll have to start picking up national insurance and pension contributions to cover furloughed hours, too.
In September, the Government contribution goes down to 70% of wages and as well as NICs and pensions, you’ll have to top up pay to at least 80%.
Then in October, the Government sub goes down to 60%, covering up to £1,875 of salary. The same rules will apply around NICs, pensions and wages top-up.
The Chancellor, Rishi Sunak, seems determined to get the economy running under its own steam, because at some point – probably in his Budget this autumn – he’ll have to explain how all these grants are going to be paid for.
With that in mind, it was no surprise to hear him underline in his emergency economic update on 8 July – a sort of mini-Budget – that the furlough scheme will definitely terminate on 31 October:
“Furlough has been a lifeline for millions, supporting people and businesses to protect jobs. But it cannot and should not go on forever.”
Some beleaguered businesses might disagree.
Government support still on offer
When lockdown kicked in, the Government was slow to provide support for the self-employed but eventually came up with the self-employed income support scheme (SEISS).
Though many weren’t eligible, particularly those who had incorporated and made themselves directors, it was gratefully received by those who did qualify.
The first round closed on 13 July and the second opened immediately the next day on – no surprise – slightly less generous terms. The first scheme covered 80% of average trading profits up to £2,500 a month. The new round caps the Government contribution at 70%, up to only £2,190 per month.
Another major plank in the Government’s response to COVID-19 was the coronavirus business interruption loan scheme (CBILS).
It is being delivered through private banks with the Treasury guaranteeing 80% of the finance to the lender and paying interest and fees for the first 12 months. It covers UK-based businesses with an annual turnover of up to £45 million, with loans available up to £5 million.
For smaller businesses, a related Bounce Back Loan scheme offers up to £50,000 to smaller businesses, with the Government guaranteeing 100% of loans, which are interest free for 12 months.
As always, terms and conditions apply – if you’re a client, we’ll be happy to help you work out your eligibility and advise on the application process.
In the surprise 8 July mini-Budget, some new schemes were also announced.
There is a new grant for employers designed to encourage them to continue to employ staff brought back from furlough until at least January 2021. It offers £1,000 for every employee brought back and kept in a job paying at least £520 on average from November to January.
Critics have pointed out that most businesses either don’t need this grant, or are in sufficiently dire straits that it won’t change their plans.
More interesting, perhaps, is the new kickstart scheme built around a £2 billion fund and designed to create high quality half-year work placements for 16-24 year-olds struggling to find work. It will cover 100% of National Minimum Wage for 25 hours a week, plus employer National Insurance contributions and minimum auto-enrolment pension contributions.
Other sources of funding
Standard bank loans continue to be available to those that can make a decent business case. Some ecommerce and online retail businesses in particular have had a good year, actually, and now might be a good time to capitalise on that and cement growth.
And let’s not forget crowdfunding. It’s been popular for years but has seen a boost this year as struggling businesses such as music venues and beloved pubs call in favours from fans to help them stay afloat.
In many areas, people have turned away from crowded town centres and rediscovered their own neighbourhoods and local businesses – could you benefit from a bit of that warm glow with a crowdfunding campaign?
Pivot, change, branch out
All of the above options depend on you having an inspiring plan for growth – that is, goals and ambitions beyond just staying afloat.
Businesses that have been adaptable have done well this year. For example, those who were able to quickly move forward plans to set up ecommerce stores and start trading online have done pretty well.
In fact, anecdotal evidence says that a lot of bounce back loans were spent on websites, setting up web stores and the infrastructure needed to pivot to internet sales, such as forklifts and delivery vehicles.
Tighten your belt
Finally, there’s the old-fashioned approach: if you can’t get more money into your business, find ways to stop so much going out.
Actually, this is a good exercise to undertake regularly regardless of global crisis.
Are there decisions you’ve been putting off, like restructuring the workforce? It’s hard but sometimes necessary.
Are you getting paid enough and on time? Consider reviewing your pricing structure and your approach to credit control.
Do you need all those subscription services and recurring expenses? You’d be surprised how often people discover they’re paying for things they’ve not used in years – and renewing the contract on autopilot every year, too.
If nothing else, you need to make sure you know exactly what’s being spent, what’s coming in and have a plan for what you’ll do if you hit another bump in the road.