Nic Redfern, Finance Director at independent financial comparison website NerdWallet, looks at what UK businesses can expect from tomorrow's Budget announcement.
As the UK Government unveiled its plans to cautiously ease lockdown and social distancing measures, rumours have been milling as to how it plans to support the economy through this transition. Indeed, in the run up to tomorrow’s Spring Budget, all eyes are on Chancellor Rishi Sunak as he prepares to announce his spending plan for the coming year.
For the many businesses that will remain closed for the coming months, speculations have turned to whether the Chancellor plans to extend pre-existing support schemes, or whether he will focus on re-paying the debts incurred throughout the pandemic.
Positively, rumours suggest that the Budget will be dominated by “continued emergency support” for the businesses affected by continued closure. The question, therefore, is which schemes are set be extended?
An extension to the business rates holiday
Even before the pandemic, the slow and gradual decline of the British high street was a popular topic amongst news outlets. The onset of COVID-19 only accelerated its depletion.
The enforcement of three national lockdowns have driven many consumers to conduct most of their shopping online. Business tycoons like Amazon UK (whose wholesalers saw their sales rise by an astonishing 51 per cent in 2020) have thrived against the pandemic backdrop. Conversely, in-store businesses have seen their bottom-lines plummet.
In attempt to boost high street stores, it is expected that the Chancellor will extend the business rates holiday, which was initially intended to end in April 2021, even further yet.
The length of extension is yet to be determined. However, I expect that it will remain in place at least until all non-essential shops, pubs and leisure organisations are allowed to re-open their doors.
Possible extension to the CBILS and furlough scheme
Likewise, another measure introduced by the Government throughout the pandemic was the Coronavirus Business Interruption Loan Scheme (CBILS). This scheme grants businesses access to loans and other forms of finance up to £5 million. Further, the Government guarantees up to 80 per cent of the finance to the lender, while also paying interest and additional fees over the first twelve months.
Up until now, this has been a vital lifeline to many organisations throughout the pandemic, as they attempt to build back from the difficulties faced over the past twelve months. That said, the scheme is scheduled to end on 31 March.
This has been a point of contention; a recent survey has uncovered that almost a third (31 per cent) of businesses are keen to see the scheme extended. And certainly, these funds could prove just the trick to help organisations get back on track.
Additionally, further reviews are expected to take place to ensure that the furlough scheme is prolonged. And rightly so – seeing as the scheme has enabled a total of 1.2m employers to safeguard livelihoods and place their staff on furlough, according to figures from HMRC.
This has been an expensive incentive, with the measure costing the Government a huge £46bn – but as some businesses remain closed, it will remain an important measure.
Thankfully, Mr Sunak has emphasised that businesses are set to receive more support beyond March 2021, which should provide some comfort to businesses. So, whilst it is unconfirmed as to whether the CBILS or furlough scheme will be extended, the promise of further support packages likely on the cards.
Doubling down on digital transformation
Finally, in the upcoming Budget, I would hope to see the Chancellor committing to providing organisations with further support to drive their digital transformation initiatives.
COVID-19 has highlighted the dependence of UK businesses on technology. Indeed, March 2020 saw the majority of the UK’s workforce became remote workers almost overnight. As such, future-proofing the operations of organisations across all sectors would be a worthwhile investment.
Whether this is through launching a Digital Voucher Scheme (as introduced by the Hong Kong Government), or by introducing new longer-term measures to help businesses invest in better digital infrastructures, it is vital that the Government offers adequate support to facilitate business growth even in the most troubling of climates.
As the budget approaches, and after a year of mounting uncertainty, it is likely that the Chancellor will re-commit providing emergency support to businesses. I have every hope that whatever measures are announced will help businesses get through the last of the pandemic, and embark upon new and prosperous initiatives as we slowly transition back to life as normal.