Chancellor's Economic Update

Chancellor Rishi Sunak said in his January Economic Update that the UK economy will ‘get worse before it gets better’, but did not unveil any new measures to help with the third national lockdown.

The Chancellor is under growing pressure for extra business support on top of what is already available. However, he told the House of Commons that the existing measures will help Britain through until the spring.

He is due to announce his Budget on 3 March 2021.

In his statement on 11 January, the Chancellor said there were signs of “underlying resilience” in the economy as he pointed to evidence of businesses improving their cash reserves and the new trading arrangements with the EU that finally removes Brexit uncertainty.

Existing measures

The Treasury has issued a summary of existing support measures to which the Chancellor referred.

Support for jobs

• The Coronavirus Job Retention Scheme is extended until the end of April 2021, with the government covering the cost of 80% of the wages of furloughed workers for hours not worked. Employers have to pay the associated NICs and pension contributions.
• The Self-Employed Income Support Scheme is extended until April 2021, with the government paying 80% of average trading profits in the third grant. There will also be a fourth grant, the details for which have yet to be announced.

Support for business

• The deadline has been extended until the end of March to access the Bounce Back Loan Scheme, Coronavirus Business Interruption Loan Scheme, and the Coronavirus Large Business Interruption Loan Scheme.
• Businesses are also benefiting from tax holidays and deferrals, such as in the VAT rate cut on hospitality and tourism from 20% to 5%, and business rates holidays for eligible businesses in the retail, hospitality and leisure sectors.
• The Future Fund is open until the end of January 2021. This issues convertible loans worth between £125,000 to £5 million to innovative companies which are facing financing difficulties due to Covid.
• Businesses forced to close can claim grants of up to £3,000 per month via their local authority, depending on the rateable value of their premises. Businesses that remain open, but are impacted by local restrictions, can also claim grants worth up to £2,100 a month, whilst pubs also benefitted from a £1,000 one-off extra grant in December 2020.
• The Chancellor also recently announced that all businesses in England forced to close can claim a one-off grant of up to £9,000. This is in addition to the monthly closed grant amounts above and depends on the rateable value of business premises.
• The Trade Credit Reinsurance Scheme that ensures trade credit insurance coverage and credit limits are maintained during the pandemic is extended to June 2021.

Further support for Jobs

• The Kickstart scheme creates paid, 6-month work placements for over 200,000 young people deemed to be at risk of long-term unemployment.
• The Job Entry Targeted Support scheme is providing six months of personalised support for people who have been unable to find work within the first 3 months of unemployment.
• There is a doubling of the number of work coaches available to help people across the UK get back into to work.
• A Restart scheme goes live from Summer 2021 to provide 12 months of tailored support for those out of work for at least 12 months.
• The government is expanding apprenticeships in England and providing employers with a hiring incentive for each new apprentice they hire, with £2,000 available for every apprentice hired aged 16 to 24 and £1,500 for those aged 25 and over.
• There is also investment in traineeships in England for people of all ages that includes a work placement and prepares them for an apprenticeship or job.
• The government’s sector-based Work Academy Programme is supporting jobseekers to retrain and gain work experience.

Low income families

• Workers on low incomes who can’t work from home and have been asked to self-isolate can receive £500 self-isolation payments.
• There is a temporary increase in Universal Credit (UC) standard allowance and Working Tax Credit basic element, an increase in Local Housing Allowance rates and a relaxation of the UC minimum income floor for self-employed claimants.
• The SPP rebate scheme reimburses employers with less than 250 employees for up to two weeks of Covid-related SSP per employee and extended SSP to those ill or self-isolating due to Covid-19 or who are clinically vulnerable and unable to work as a result.

Local authorities

• Local authorities in England will be given an additional £500 million discretionary funding to support their local businesses. This is on top of the £1.1 billion discretionary funding already given to support their local economies and help businesses impacted by Covid.
• Local authorities are also expected to receive over £3 billion of support next year to help households with their council tax and to compensate councils for lost council tax and business rates revenue.

Covid transition hub

Check out our Business after COVID-19: Transition Knowledge Hub for more guidance and advice on managing the pandemic.