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BUSINESS REVIEW MAY 2020

BOUNCE BACK LOANS LAUNCHED

A fast-track loan scheme designed to provide small businesses with access to vital cash injections has been launched as part of further government efforts to mitigate the economic damage caused by COVID-19.

The Bounce Back Loan Scheme (BBLS) allows small firms adversely affected by the coronavirus lockdown to borrow between £2,000 and £50,000, with government guaranteeing 100% of the advance and paying all fees and interest in the first year. Most loans are expected to be paid within 24 hours of approval and no repayments are required for the first 12 months.

The scheme opened on 4 May and over 200,000 applications were received
in the first two days. Early evidence suggests banks are processing loans relatively quickly with Treasury figures indicating that just over half of all advances received on day one had been approved within 24 hours.

Concerns have been expressed about the small number of banks authorised to handle applications and the fact that some lenders are restricting access to existing customers. As a result, it is feared some firms may miss out on funding. Suren Thiru, Head of Economics at the British Chambers of Commerce (BCC), said: “The low number of accredited lenders is troubling as it could see firms who use other lenders effectively locked out of the scheme.”

BUSINESSES READY FOR RESTART

Results from the BCC Coronavirus Business Impact Tracker suggest the vast majority of firms will need three weeks or less to prepare for restarting operations once coronavirus restrictions are eased.

The survey of 540 businesses, conducted between 29 April and 1 May, found that 25% would require no notice at all, while 35% would be able to cope with less than a week’s notice and 29% would need between one and three weeks’ notice. This suggests around nine out of ten firms could restart within three weeks of any loosening of the lockdown.

Perhaps unsurprisingly, smaller businesses were found to be relatively more agile, with 64% of respondents employing fewer than 10 people saying they would need less than
one week or no notice at all to restart operations. Business-to-business service firms also felt they could respond quickly with 68% requiring less than a week’s notice.

Commenting on the findings, BCC Director General Dr Adam Marshall said: “Our results show that businesses’ ability to restart quickly varies by company size and by sector. For these reasons and more, it will be crucial for the government to maintain and evolve support for businesses, to give as many firms as possible the chance to navigate a phased return to work.”

FURLOUGH SCHEME UPDATE

The government has announced changes to its Coronavirus Job Retention Scheme which went live on 20 April and is now responsible for paying the wages of some 7.5 million workers.

Originally, Chancellor Rishi Sunak announced that the furlough scheme would run for three months, backdated from 1 March to the end of May. However, Mr Sunak subsequently extended that period by one extra month to finish on 30 June and at the same time revised the scheme’s cut-off date to allow the inclusion of employees hired on or before 19 March. However, for such employees to be covered, their employer must have made a HMRC real-time information system notification about a payment to the employee by the revised date.

On 12 May, the Chancellor announced an extension to the scheme, to the end of October 2020. The scheme will continue to pay 80% of furloughed employees’ salaries up to £2,500 per month. However, companies have been asked to “start sharing” the cost of the scheme from August onwards – employers currently using the scheme will be able to bring furloughed employees back part-time and share the salary costs with the government. For example, employers could pay 20% of their furloughed employees’ salaries, with the government paying the remaining 60%.

The government has said that almost a million employers have reported furloughing staff since the start of the scheme on 20 April.

LOAN SCHEME REQUIREMENTS EASED

UK Finance has announced that the country’s seven largest small business lenders have relaxed evidence requirements for applications to the Coronavirus Business Interruption Loan Scheme (CBILS).

In a joint statement with the seven lenders, UK Finance said: “Lenders will only ask businesses for information and data they might reasonably be able to provide at speed, and we will not require the provision of forward-looking financial information or business plans from businesses applying for CBILS-backed lending, relying instead on our own information to assess credit and business viability.”

By 6 May, SMEs had accessed over £5.5 bn in funding through the CBILS with almost 34,000 loans having been approved. However, by the same date, lenders had received almost 63,000 completed applications, leading to accusations that many businesses were still struggling to access desperately needed funds quickly enough.

In addition to the relaxation of evidence requirements, the British Business Bank has announced that a further nine lenders have received accreditation, bringing the total number of CBILS lenders to more than 60. It is now hoped that these combined changes will make the scheme easier to access and the application process quicker.

NEW WORKING ‘NORMS’

Research suggests UK employees have adapted well to working remotely during the coronavirus lockdown and believe this could be a catalyst for greater flexibility in the way firms operate in the future.

The survey of 607 employees conducted by Toluna and Harris Interactive found that many respondents were not only comfortable working at home but also just as productive. Indeed, the study found that only 35% of workers felt they were less productive working remotely.

There was also an expectation that new working ‘norms’ are likely to emerge when employees return to the office environment. For instance, 51% of respondents said they expect increased flexibility around working hours and schedules, while 47% think there will be improvements around home working arrangements enabled through greater use of online collaboration tools.

This expectation was echoed in research undertaken by the Institute of Directors. Its survey found that four out of ten businesses believe their organisation had made adjustments to working arrangements they intend to retain after lockdown. And increased working from home and a greater focus on digital services were two common actions that directors believe will continue going forward.

Other News

ADDITIONAL GRANTS

The government has announced that the local business grant funds scheme will receive a 5% top-up in order to close the support gap for businesses that do not qualify for existing business rates relief. The additional funding is largely aimed at businesses with ongoing fixed property-related costs that have suffered a substantial reduction in income due to COVID-19 restrictions. Payments will be made at local authority discretion based on economic need.

SMALL COMPANY DIRECTORS ‘DESPONDENT’

IPSE (the Association of Independent Professionals and the Self-Employed) has revealed that limited company contractors it has spoken to are “utterly despondent and feel completely left behind.” The comments came after the organisation released research showing that 69% of limited company contractors do not feel government measures are enough to sustain them through the coronavirus crisis. IPSE has called for urgent action to support self-employed people working through limited companies.

TAX CONSULTATION DEADLINES EXTENDED

The government has extended deadlines for a number of tax consultations in order to ensure that those affected by Covid-19 are given ample opportunity to express their views on any proposed rule changes. The consultations with new extended timelines include the call for evidence on the business rates review and the consultation on the design of a carbon emissions tax.

If any article in this market update has an effect on your finances and you would like professional advice, then please get in touch.

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