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The UK's coronavirus plan may be unsuitable for small businesses and the self-employed

  • The UK goverment made headlines last week when it announced a £350bn economic support package, but many small businesses and self-employed people could be left out in the cold.

    Though the coronavirus pandemic will inevitably pass and the world will one day get back to normal, the lingering economic impact of this disaster will be felt for years to come. The immediate impact of the outbreak has already been disaserous for UK workers, with thousands of businesses shutting their doors and hundreds of thousands of workers already laid off.

    Chancellor Rishi Sunak announced an unprecedented £350bn support package to help businesses cope with the virus, and later announced plans to pay 80% of staff costs for those laid off due to the pandemic. As details of how businesses will access the funding now start to emerge, some companies are discovering that the support is not quite as accessible as it seemed.

    £330bn in loans, but not for everyone:

    £330bn of the promised support comes in the form of loan guarantees supplied to banks, a promise that the government will assume 80% of the risk of the loan. The loans are available to companies in only a small number of industry sectors affected by the disaster and must still be assessed to be competitive in the long-term, and loans of over £250k will also have to be secured on company assets such as buildings and equipment.

    These loans are designed to counteract the temporary financial downturn of a business due to coronavirus disruption, but ultimately it's still debt that a company may not want to take on. BBC business editor Simon Jack noted today in his own commentary that the scheme won't even reach many of the UK's most iconic retail chains and hospitality firms. He explained that there is support for investment-grade companies and loans for firms under £45m turnover, but many large chains sit in between and will fall through the cracks.

    Grants for small businesses, but not that small:

    Every small business has been affected by the coronavirus outbreak, with some industries able to switch to working from home at a loss of some productivity and others just having to shut their doors and let staff go. The plan to provide grants to small businesses affected by the disruption is a welcome development, but it may not apply to many startups and similar small businesses.

    Grant funding of £25,000 was announced for small businesses in the retail, hospitality and leisure sectors, but only for those that own property with a rateable value between £15,000 and £51,000. Smaller grants of £10,000 were also announced for companies (still to be clarified if this is limited to particular sectors), but this is again only for businesses in receipt of small business rate relief or rural rate relief.

    This was probably done because the government has detailed information on rates payers already, but it means the support won't reach any business that doesn't pay rates. This includes those working in shared rented offices, co-working spaces and startup spaces, even though they've still been disrupted by office closures and may even be part of the hospitality and leisure sectors.

    80% of wages, but for who exactly?

    The government's plan to pay 80% of the wages of workers laid off due to the coronavirus has been seen as a huge intervention, but the actual implementation details are still a little muddy.

    The scheme is open to all companies who promise to retain affected employees, keeping them on payroll but designating them as "furloughed workers" according to employment law. Firms must then submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal, and HMRC will reimburse the employer for 80% of the wage costs for those workers up to a limit of £2,500 per month.

    More information on this scheme is still forthcoming and the portal doesn't appear to exist yet, but there are already serious concerns that this won't cover self-employed workers, sole trader business owners, or those on zero-hour contracts. Many of these people have lost most of their business as a result of the coronavirus outbreak and still have bills and rent to pay during the crisis.

    Another problem is that these grants won't be made immediately, but will instead be made available by the end of April. Businesses are expected to pay the wages of their employees in the mean time and fund this cash flow through a temporary deferment of VAT bills. This may not be enough for companies whose main outgoings are staff costs, especially as startups and micro-entities are disproportionately more likely to have low or zero VAT bills.

    What can Northern Ireland do differently?

    The Northern Ireland executive seems to have recognised that parts of the UK's strategy aren't exactly a good fit for Northern Ireland, and has instituted its own version of the relief plans in effect in England. While England is giving retail and hospitality firms rates relief for 12 months, for example, Northern Ireland is giving all companies a three-month rates holiday regardless of sector. That's a welcome change that the NI tech sector and startups will be glad to see.

    The grants for small businesses could also be administered slightly differently in Northern Ireland. While the £25k grant was announced as being open to companies in the hospitality, leisure, and retail sectors with a rateable value of 15,000 to 51,000, the wording on the announcement suggested that the £10,000 grant could be available to all NI small businesses with a "net asset value" of up to £15,000.

    This has still to be clarified, but it hints that the NI scheme may actually apply to startups and other small businesses that don't currently pay rates or claim rates relief and have under £15,000 NAV, and it could apply across all affected industry sectors rather than just hospitality and retail. The tech sector in the UK has spent the last several years switching its startup model to a more agile strategy involving incubators and hubs around the country, and all of those startups have been disrupted by office closures.

    The wage scheme announced last week is still in the early stages of implementation but it seems that it will be administered directly by HMRC. If the scheme turns out not to cover self-employed people and sole traders, the Northern Ireland executive should seek alternative measures for protecting those workers. Northern Ireland has a large proportion of sole trader tradesmen, workers on zero hour contracts who need protections, and entrepreneurs who might not otherwise be covered.


    UPDATE: It does appear that the £10,000 grant scheme applies to all businesses regardless of industry sector in Northern Ireland. However, while ministers reportedly announced it would be based on the "Net Asset Value" of a business, it appears to actually be being based on the "Net Annual Value" of business property. At this time, it appears that any business without property will get no support through this scheme.


    This opinion piece is based on current information as of the morning Monday 23rd March. Please send any corrections or updates through to . If your company has been affected by the coronavirus outbreak, consult an accountant for up-to-date advice on how to proceed.


    About the author

    Brendan is a Sync NI writer with a special interest in the gaming sector, programming, emerging technology, and physics. To connect with Brendan, feel free to send him an email or follow him on Twitter.

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