Budget 2020 analysis: How it will affect your small business

Budget 2020: Coronavirus economic measures

Alongside increased NHS spending and a repeated pledge to do “whatever it takes”, the Chancellor Rishi Sunak announced the following specific measures to help businesses struggling with the impact of coronavirus:

• A 14-day SSP (Statutory Sick Pay) refund for small businesses paying employees self-isolating in line with government guidelines – this will apply to all businesses with less than 250 employees. SSP will now be paid from day 1 instead of day 4, and employees will be able to self-certify via the 111 NHS phone number. For more information, head to our dedicated page on the SSP refund scheme.
• A scaling up of the HMRC Time to Pay service, allowing more businesses to defer tax payments over an agreed period of time.
• A business interruption loan scheme – government-backed loans that will be delivered through the British Business Bank and help support small businesses struggling with cash flow. Initially, up to £1.2m was available per business, but this was later increased to up to £5m per business. The first six months of this finance will be provided interest-free.
• A 12-month business rate “holiday” for all small businesses operating in the hospitality and leisure sector. This was later extended to all retail, hospitality and leisure businesses. Moreover, all retail, hospitality and leisure companies with a rateable value between £15,000 and £51,000 will be eligible for a £25,000 grant.
• Cash grants (initially £3,000 but then raised to £10,000) for very small businesses struggling with the impact of the coronavirus crisis. To be eligible, companies must already be claiming business rates relief. For more information, see our dedicated piece on the coronavirus business grant.
• Ahead of the budget, the Bank of England also announced it was cutting interest rates from 0.75% to 0.25%, a move expected to significantly reduce the overall cost of borrowing for small businesses. Just over a week after the budget, they were then cut to 0.1%.

Broadly, the measures announced were cheered by small businesses.

Mike Cherry, the National Chairman of the Federation for Small Businesses, was particularly positive. Hailing the “unprecedented” package of measures announced thus far, he argued:

“The Government has thankfully today made clear that it will step in and provide small firms with the cash flow they need – whatever it takes. This marks a hugely important intervention. And it’s good to hear the Chancellor pledging to do more in the days ahead.

“Small firms are having their futures threatened in the here and now. They need support in the here and now.”

Sabby Gill, EVP and MD of Sage UK & Ireland, was also optimistic, stating:

“These measures will help businesses manage their cash flow better and help them remain operational during this time of great disruption. We ask that the government keeps its finger on the pulse of the country’s business ecosystem to ensure that as many businesses as possible take advance of the new support measures introduced.”

Others though were more cautious, with Paul Cherpeau, the Chief Executive of the Liverpool Chamber of Commerce underlining that how this support is delivered is crucial:

“It is essential that the accessibility to the support announced is simple, quick and robust to ensure the provision of an adequate safety net to help businesses whose cash flow and prospects have been disrupted due to the impact of coronavirus.”

Focussing on business rates, Rob Hattrell, the vice president of Ebay UK, struck a balanced tone. He praised the action taken thus far, but reinforced that the long-awaited review of the business rates system (now postponed until autumn) must bring real improvement:

“The measures outlined in the chancellor’s budget will bring relief to the smaller retailers that line the high streets up and down our country and is critical for levelling up the economy in favour of small businesses and entrepreneurs in all our nations and regions.

“I often meet with some of the 300,000 small and medium-sized businesses that use the eBay platform, and many of these entrepreneurs tell me that business rates are one of their biggest day-to-day concerns, representing one of the largest bills they pay.

“As almost half of the SMEs on the platform also have a physical presence, a large proportion of our eBay SMEs will benefit from the changes that were announced in last week’s budget.

“In this current environment, we need to support British businesses. The government’s announcement of 12-month business rates holidays will have alleviated some of the pressure put on businesses in the wake of the coronavirus.

“That said, consistent and permanent improvement to the business rates system is vital to promote entrepreneurial activity in our country for the future. I hope that the business rate review due later this year builds on the Chancellor’s actions from last week and leads to a long term shift for the better for small businesses.”

And many small businesses were critical that the majority of the support was provided through loans that would eventually need to be paid back with interest. 

Giles Moody, the Head of Strategy at food and beverage brand consultancy Young Foodies, noted that young FCMG brands are in a particularly difficult position:

“I’m relieved to see that Hospitality, Leisure and Retail are major focuses, but I do worry about many of the entrepreneurial food and drink brands who supply them falling between the cracks of these policies. By virtue of being new businesses, their lack of business history or stability makes it notoriously hard for them to get bank business loans. It’s unclear if this level of detail has been addressed, so it’s an immediate concern. And even if so, I’m concerned that the relief options come in the form of debt which will not only affect longer term business confidence and motivation, but will no doubt start to impact on mental health.”

Finally, research from business bank Tide made clear how vital these measures are, and indicated that further support will likely be needed.

Tide CEO Oliver Prill noted:

“Our research reveals that UK SMEs are lacking confidence in the UK economy and their ability to grow their businesses in the short term. More than half (52%) are concerned their business income will decrease over the next quarter, and 57% are unlikely to be able to invest in growing their business in the coming months. Respondents highlighted coronavirus as a key concern, with the impact on imports (particularly from Asia), limits on travel, the resulting impact on global political stability, and the market volatility being regularly cited issues.

“With UK SMEs being ever more exposed to the global economy, our concern is the long-term impact the coronavirus could have. The reliance many businesses have on international suppliers and trade is significant and is likely to have a devastating effect.”

Overall, while the impact of the measures will vary by sector and small business maturity, they certainly felt like steps in the right direction.

However, further support is required to avoid many UK small businesses experiencing serious financial difficulties and potentially going bankrupt.

<>Budget 2020: Tax changes</>

Alongside the coronavirus measures, the 2020 budget included a variety of tax changes, including a change to entrepreneurs’ relief, and an increase in the employment allowance.

<>Budget 2020: National Living Wage increase</>

Another major measure in the 2020 budget was an increase to the National Living Wage (what used to be the National Minimum Wage).

The chancellor announced that, “as long as economic conditions allow, by 2024 the National Living Wage will reach two third of median earnings”.

At current rates, this would mean a National Living Wage of £10.50 per hour by 2024.

This announcement prompted a mixed response from the small business community, with some concerned that companies may have to pass the increase on to their customers.

Hannah Carter, the founder of ethical cake producer OGGs, praised the planned increase despite it having the potential to slow the growth of her business:

“Whilst this will increase our cost of goods, it is crucial that we ensure every individual in our entire supply chain is protected and paid fairly. As a small business, it will potentially mean we grow a little slower as a result, but it is the right thing to do, so we welcome this new measure.”

By contrast, Stuart Wilson, the managing director and founder of Lost Sheep Coffee, warned that companies like his may have to raise prices to cope with the proposed rise:

“The Living Wage being increased is fantastic for employees but not so much for the customers. As an employer, this will cost the company thousands and thousands over the course of the year, which we will need to recoup by increasing our prices.

This will be the same across the high street, so by raising the wage bill overall prices have to increase, which in turn reduces the benefit of the new pay packet. Like many other companies, we have absorbed the £ph increases so far over the past few years, and not passed that cost on to the consumer but, with the way things are heading, these future costs will result in consumers facing higher costs or smaller product sizes.”

<>Budget 2020: Infrastructure investment</>

Finally, the chancellor announced three key pieces of infrastructure investment that small business owners should be aware of:

• A £500m investment to support the rollout of rapid charging hubs for electric vehicles – the intention is for drivers to never be more than 30 miles from being able to charge their car.
• A £5bn investment to bring “gigabit-capable broadband” to rural parts of the UK
• A £12.2bn investment in affordable housing

The electric vehicle charging commitment further demonstrates that this is an area small businesses really need to be looking at – especially with the pledge to ban sales of petrol and diesel cars by 2035. Now is the perfect time to start planning how to transition your business to an electric fleet.

In terms of the rural broadband investment, Mark Pocock, home communications expert at Broadband Choices, argues that this spending is long overdue and should help millions of homes and businesses in rural areas:

“The £5 billion investment into ensuring gigabit-capable broadband is available in the most hard-to-reach places of the UK is said to happen by 2025. If the Government reaches this target, it will help more than five million homes and businesses, but there will still be a lot of new housing estates in hard-to-reach areas, and a lot of new homeowners will have to struggle with limited signal within this time.

However, the reality is that broadband should be up to standards before anyone moves in – both in terms of availability and in terms of speed.

Finally, the housing crisis is nothing new, but this new wave of investment should lead to more opportunities for SMEs involved in the construction industry.