In addition to Mark Carney’s announcement this morning that the Bank of England that interest rates would reduce by 50 basis points to a historic low of 0.25%, new Chancellor Rishi Sunak presented his first Budget from the House of Commons today amid concerns over coronavirus and the potentially challenging conditions that lie ahead.
Sunak’s virgin budget outlined several positives for UK businesses, which we have summarised below, including a £30 billion support package for small businesses that considers the economic disruption likely to be caused by the virus in the short term.
Scrapping of business rates for some qualifying smaller businesses
A tax cut worth up to £1 billion will see business rates abolished altogether for smaller businesses in the retail, leisure and hospitality sectors where premises have a rateable value of less than £51,000.
This is aimed at helping smaller businesses who are particularly vulnerable to the impact of coronavirus to navigate the impact of decreased demand until the end of the year and will see eligible businesses save up to £25,000.
Mike Cherry, national chairman of the Federation of Small Businesses (FSB), said:
“Suspending business rates for small high street firms is a huge bonus to our town centres and high streets [...] this shows a real commitment to supporting small businesses at the heart of communities.”
Additionally, other small businesses who pay no business rates will receive a £3,000 cash grant, worth an estimated £3 billion.
Statutory sick pay for SMEs
The government have committed to refunding the cost of up to 14 days statutory sick pay to any small and medium sized businesses who need to self-isolate as a result of coronavirus at a total cost of £2 billion.
Mr Sunak advised that this will apply to businesses with less than 250 employees from day one, rather than day four, and will help to ease the strain of covering these costs, acknowledging that “temporary disruption” would be caused.
Additionally, commitments were made to:
- Increase R&D funding by £22 billion - the fastest and largest increase in spend in this area to date and with an extra 15% promised for 2021
- Release a swathe of loans and business grants, including £200 million in new British Business Bank funding for scale-ups and £130 million committed for new business
- Push the National insurance threshold to £9,500 from April 2020, giving people “a £31 million tax cut”, said the chancellor
- Make available £120 million in funding for flood damage repairs across the UK after recent winter floods and to help communities (including businesses) to build resilience
- Invest more than £600 million in “future prosperity”, with a promise to ensure that public net investment is the highest it has been since the 1950s
There was also some notable concern from business leaders that the contentious subject of IR35 and its impact on self-employed contractors was not mentioned in today’s budget.
The 2020 budget document does however reveal that this is still on track for rollout in April this year, despite significant objection from critics.