Chancellor Rishi Sunak has recently unveiled a raft of new measures to try and re-ignite the UK economy as the nation begins to emerge from the Coronavirus pandemic.
With pledges such as reduced stamp duty and discounted meals, through to financial rewards for firms taking on apprentices/trainees and returning staff from furlough as well as VAT cuts, experienced insolvency practitioner and CVR Global Partner Lee De’ath weighs up how effective some of the headline measures might be.
The word “unprecedented” is probably going to be the one word that will sum up 2020, and while the government should be applauded for the mammoth levels of support it has offered to so many industries, schemes such as furlough have to come to an end eventually – which is why so many people were awaiting this latest announcement from Rishi Sunak.
The future is uncertain and many business owners are no doubt attempting to forecast if they can keep their existing workforce on after the furlough scheme ends in October.
The Chancellor’s summer statement was very wide-ranging, in the hope that the measures will achieve a positive domino effect – but just how effective will they be?
Job Retention Bonus
Paying employers £1,000 if they bring their furloughed workers back from now until January sounds like a great incentive, as getting people back into work has to be a priority to get the economy going.
My fear is that many employers have already reviewed their staff levels and requirements going forward, and may have decided that a significant change to staffing numbers is required – a £1,000 bonus is unlikely to outweigh the savings made from making redundancies.
Also, just because businesses have been able to re-open, it doesn’t mean that income is going to suddenly return, therefore it is not as simple as bringing the whole workforce back. Pubs and restaurants, for example, have the double whammy of having to operate at a lower capacity, whilst battling against lingering consumer concern of contracting Covid-19 if they venture out.
Kickstart Jobs Scheme
Again, on the face of it, an initiative to get 16-24-year-olds on universal credit into work via paid-for placements for six months is a great opportunity for young people to “kick start” their careers – however, businesses are more likely to be focused on retaining their existing workforce at this stage, raising concerns over how engaged they will be with this.
Offering financial incentives of £1,000 for trainees and £2,000 for apprentices should be commended as it will support job creation from some firms – I just wonder how sustainable this will be though? After all, we don’t want businesses taking on new staff just for the payment – there needs to be genuine jobs that are going to offer longer term prospects, otherwise we could see another wave of redundancies next year.
VAT cut for hospitality
This six-month VAT cut from 20 per cent to five per cent on food, accommodation and attractions is brilliant news for the hospitality sector which has been hit harder by the pandemic than most – as it was one of the last areas to re-open.
Pubs, restaurants and hotels also have the added bonus of consumers being offered half-price meals – paid for by the government – to entice more customers to eat out.
Will we see all these savings passed on to the consumer? I doubt it, and understandably so, because pubs and restaurants need to claw back a large chunk of profit they will have missed out on over the past few months to ensure they can survive in the longer term.
Stamp duty holidays
House buyers will now only need to pay stamp duty on properties over £500,000 for the next six months – this will on average save people several thousand pounds and has already seen some estate agents reporting a rise in enquiries following this announcement – which is encouraging given there were major concerns about house prices falling.
However, whilst uncertainty over future and continued employment remains in the majority of sectors over the coming months we are likely to see banks stalling on mortgage offers, and even if some families are given the green light to borrow more money, they may be reluctant to do so given the economic volatility created by Covid-19.
The housing market is often an accurate barometer of how the economy is performing, so it will be interesting to see how the market performs over the coming months.
It is rare for us to see such a range of major measures announced all at once – with understandable concerns about how this latest £30bn package is going to be paid for in the future. It is indicative of the unprecedented times we are living in though, and if various areas of society are to financially survive as we know it, then higher taxes will have to follow at some point.