How Rishi Sunak’s Winter Economy Plan could help your business Rishi Sunak today announced a raft of measures to help UK businesses - find out what you need to know about the Job Support Scheme, Pay as You Grow and other help here. Written by Alec Hawley Published on 25 September 2020 Our experts We are a team of writers, experimenters and researchers providing you with the best advice with zero bias or partiality. Written and reviewed by: Alec Hawley Today, the Chancellor Rishi Sunak set out his Winter Economy Plan, a strategy that sets out how the government will help UK businesses to deal with the ongoing economic crisis caused by the COVID-19 pandemic.A wide variety of measures were announced, including a new Job Support Scheme, a “Pay as you Grow” approach that allows SMEs to repay bounce back loans over a much longer period, and an extension to the self-employed grant.This article will go through everything that was announced, and give detailed explanations of the major new schemes. Job Support Scheme Self-employed grant extension Pay as You Grow Other loan changes Tax deferrals Hospitality and Tourism VAT Analysis Key points for your business Job Support SchemeGraphic via @RishiSunak twitterThe Job Support Scheme is the centrepiece of the Winter Economy Plan.Basically, the idea is that, instead of making employees redundant, businesses will be able to have them work fewer hours and their salary will be topped up by the government.Here’s how it works:Employees on the scheme must work at least a third of their normal hours and be paid their full appropriate wage for this workThen, the remaining salary will be partially covered by a combination of the government and their employer, each of which would pay a third of this amountThe employee would therefore receive 77% of their normal payThe government would pay a maximum of 22% of their normal salaryThe government payment is capped at £698 a month This example shows how this would work in practice:If an employee normally worked 30 hours a week for £300 a weekIf they only worked a third of those hours, they would work 10 hours a week and be paid £100 a week for that work as normalThis would leave £200 a week to be covered under the Job Support SchemeOf this £200 a weekThe government would pay 33% (approximately £67 a week)The employer would pay 33% (approximately £67 a week)So, in total, the employee would be paid £234 a week, around 77% of their normal weekly salaryAnd the government would contribute £67 a week, around 22% of their normal weekly salaryThis would leave £167 a week to be covered by the employer, or approximately 56% of their normal weekly salary The Chancellor made it clear that this support would be targeted at the businesses that need it most, so all UK SMEs will be eligible for the scheme.Larger businesses will have to demonstrate that their turnover has fallen to be able to use the scheme.The scheme is open to employers across the UK, including employers who didn’t previously use the furlough scheme.The scheme will run from 1 November 2020 to 30 April 2021, and the final details on how it will work are still being worked out in partnership with unions and business groups.Employers that retain furloughed staff on shorter hours will be eligible for both the new Job Support Scheme and the previously announced Job Retention Bonus.Application details have not yet been released but, going by how the government has operated previous support schemes, it’s highly likely that applications will be made online via the gov.uk platform. Self-employed grant extensionGraphic via @RishiSunak twitterThe Chancellor also committed to extending the existing Self-Employed Income Support Scheme, so that it provides an equivalent level of support to the Job Support Scheme.Full details are given on this gov.uk Self-Employment Income Support Scheme Grant Extension factsheet, but here are the key details:If you meet the eligibility criteria (see the article linked above), then you will receive the taxable grant in two lump sum instalments.Support is equal to 20% of the average monthly trading profits, so each lump sum would be 3x this averageThe first payment is capped at £1,875, while the cap on the second has not yet been announced Pay as You GrowGraphic via @RishiSunak twitterAnother major announcement was Pay as You Grow, which will hugely ease the pressure on companies worried about repaying Bounce Back loans from March.Now, businesses will be able to:Pay back their loans over six to 10 years, halving their monthly repayments as a resultMake interest only repayments if they’re strugglingSuspend repayments altogether for up to six months if they run into real troubleSunak also made it clear that no business taking up pay as you grow will see their credit rating impacted as a result. Other loan changesFor businesses that need larger loans, the Chancellor also said that the government guarantee on CBILS loans would be extended for up to 10 years, making it easier for lenders to give businesses more time to repay.Graphic via @RishiSunak twitterFor all of the government-backed loan schemes, the application deadline has been extended to the end of 2020.Sunak also stated that the government is starting work on a new successor loan programme, which is set to begin in January 2021. Tax deferralsGraphic via @RishiSunak twitterBusinesses that deferred VAT payments that would have been due by March 31 2021 can now spread their VAT bill over 11 repayments, with no interest to pay.This is expected to ease the pressure on the nearly half a million businesses that deferred more than £30bn of VAT in 2020.Graphic via @RishiSunak twitterSimilarly, self-assessed income taxpayers will be able to spread their deferred tax bill over 12 months from January 2021. Hospitality and Tourism VATGraphic via @RishiSunak twitterFinally, in a move that will help two of the sectors hit hardest by the COVID-19 crisis, the 5% VAT rate for hospitality and tourism businesses will be extended to 31 March 2021.This cut was originally announced in the Summer Statement. For more information on how it works, see our dedicated piece – Hospitality VAT cut: Everything your small business needs to know. AnalysisHere, we take a deeper look beyond the facts of what Sunak said, discuss the ethos behind the plan, and highlight some early criticism of the Job Support Scheme.Does the plan go far enough?At the heart of Sunak’s statement, there was one pessimistic message – that he could not save every business, and could not save every job.So, while he described the measures in his plan as “radical interventions in the UK labour market”, it was inevitable that there would be criticism that it hasn’t gone far enough, or that certain industry sectors need more support.The implementation will also be criticised, with some of the most vocal Sunak critics being those who fall through the cracks between the various schemes, such as people who make less than 50% of their income from self-employment or company directors who take the majority of their pay through dividends.Will the Job Support Scheme work?The Job Support Scheme is undoubtedly the major measure, it’s at the heart of the Winter Economy Plan just as the furlough scheme was at the heart of the previous plan. Developed with the input of the CBI and TUC, it’s already been praised by both groups, with CBI Director-General Dame Carolyn Fairbairn saying that “these bold steps from the Treasury will save hundreds of thousands of viable jobs this winter”.However, the implementation will be crucial and it remains to be seen whether the government will address the issues pointed out in the Resolution Foundation’s response to the Job Support Scheme (JSS).These include that, on a salary of £17,000, it would cost an employer 33% more to employ two people half-time than one person full-time, and that employers may simply keep people on until January to claim the job retention bonus, or cut employees’ hours and not place them on the JSS, cutting their costs and allowing them to claim the retention bonus.Unless these flaws (as the Resolution Foundation calls them) are addressed, then an awful lot seems to hinge on employers acting responsibly. Those that can afford to plan for a long-term future no doubt will, but others in survival mode will simply do whatever they feel they need to to get through what could be a very difficult winter.Tough times ahead (even without a second wave)As for the other measures, there’s little doubt they’ll provide some support for some businesses, while others will see them as mere sticking plasters for the gaping wounds caused by the economic crisis.To have the best chance of survival, businesses should incorporate these new measures into a long-term (or at least medium-term) financial plan. This will need to include a range of scenarios, one where demand stays the same, one where it slightly increases over time, and a fall back for what happens if there’s a resurgence in the virus and demand plunges once again.Even if we can keep the virus under control, this will be a very difficult period for businesses across the UK – jobs will be lost and some companies will have to simply stop trading. The hope for Sunak is that what has been announced will provide support to enough businesses to keep the economy going, that his vision of UK businesses soldiering on despite reduced demand is true, and that we continue to recover from the massive economic downturn that followed the coronavirus national lockdown.If, however, there is a second wave (and potentially another national lockdown), this vision will become a fantasy, and far more drastic action will be required. Key points for your businessThe Job Support Scheme allows businesses to keep employees on a third of their normal hours and have the rest of their salary split between the employer and the governmentUnder this scheme, the employee receives at least 77% of their normal pay and the maximum government contribution is capped at £698 a monthIt will run for six months, from 1 November 2020 to 30 April 2021All UK SMEs are eligible for the scheme, while larger businesses will have to demonstrate that their turnover has fallen due to COVID-19The scheme is also open to employers that didn’t use the furlough schemeEmployers that retain furloughed staff on shorter hours will be eligible for both the Job Support Scheme and Job Retention Bonus The self-Employed Income Support Scheme will also be extended over the next six months, with eligible individuals receiving 20% of average monthly trading profits in two lump-sum payments that each cover three monthsThe first payment will be capped at £1,875, while the cap on the second payment has not yet been announced Under “Pay as You Grow”, businesses that need to repay a bounce back loan will be able to spread their payments over six to 10 yearsThey can also make interest only repayments if they’re strugglingAnd they have the option of suspending repayments altogether for up to six months if they run into real troubleNo business taking up Pay as You Grow will have their credit rating impactedFor CBILS loans, the government guarantee has been extended to up to 10 years, so lenders can give businesses more time to repayOn all government-backed loans, the application deadline has been extended to the end of 2020The government is starting work on a new successor loan programme, which is set to begin in January 2021 Businesses that deferred VAT repayments and individuals that deferred self-assessed income tax payments will be able to spread those repayments over the whole of 2021 (making monthly repayments instead of having to settle their debts with one lump sum) The 5% VAT rate for hospitality and tourism businesses will be extended to 31 March 2021 Startups.co.uk will keep you updated when more details are announced for any of these schemes.We sincerely wish everyone who’s reading this the very best of luck in these incredibly difficult circumstances. Share this post facebook twitter linkedin Written by: Alec Hawley Alec is Startups’ resident expert on politics and finance. He’s provided live updates on the budget, written guides on investing and property development, and demystified topics like corporation tax, accounting software, and invoice discounting. Before joining, he worked in the media for over a decade, conducting media analysis at Kantar Media and YouGov, and writing a wide variety of freelance pieces.