Summer Statement 2020: Live updates on how it will affect your small business
Live coverage of the Summer Statement 2020, including expert insight and analysis of how this “mini-budget” will affect UK small businesses.
This page will be updated throughout the day
Hello and welcome to Startups.co.uk’s live coverage of the 2020 Summer Statement. We’ll be offering regular updates on this “mini-budget” as the Chancellor Rishi Sunak unveils new measures designed to kickstart the UK economy, including analysis and insight from leading figures on how UK small businesses are likely to be affected.
What to expect from the 2020 Summer Statement?
With the UK still struggling to emerge from lockdown and begin the path to economic recovery, the Chancellor is expected to prioritise jobs and try to restore consumer confidence.
Some of the details have already been revealed.
The most eye-catching announcement so far is the “Kickstart” job scheme, with £2bn set aside for six-month work placements for 18-24 year olds. Essentially, the government will pay these placements at minimum wage for 25 hours a week, with employers able to top this up should they wish.
The placements will only be available to people claiming universal credit and at risk of long-term unemployment, and the funding is expected to cover around 350,000 placements.
The “kickstart” scheme is expected to open for applications within a month, with the first placements due to start in the autumn.
Firstly, the government is setting aside £111m for the creation of 30,000 new traineeships. These are essentially unpaid work experience placements that last between six weeks and six months for 16-24 year olds, and combine classroom-based lessons with practical work experience.
Unlike the placements discussed above and apprenticeships, traineeships are unpaid, and businesses will be given £1,000 for each traineeship they offer.
Employers must also offer an interview for an apprenticeship or job (if one is available) at then end of the scheme.
The plan has only been announced for businesses in England, but money has been set aside for similar schemes in Scotland, Wales and Northern Ireland.
While not yet confirmed, a temporary cut in stamp duty is widely expected. Generally referred to as a “stamp duty holiday”, Rishi Sunak is expected to increase the stamp duty threshold from the current level of £125,000 to as much as £500,000, effectively exempting the majority of home buyers from the tax.
This could stay in place for as long as a year and is designed to revive the UK’s flagging housing market, and should be music to the ears of estate agents across the UK.
Former chancellor Alistair Darling is the highest profile voice to back a temporary cut in VAT to restore consumer confidence and increase spending. Darling, who under prime minister Gordon Brown cut VAT in the wake of the 2008 global financial crisis, suggested it should be reduced from its current level of 20% to 15%.
However, it remains to be seen whether Sunak will take this step, with the government only confirming the measure is being considered.
A £3bn “green” investment package will be announced in an attempt to bolster the chancellor’s eco-friendly credentials and “decarbonise” public buildings and poorly insulated homes. The pledge has already been criticised by environmental groups for not going far enough.
A £1.57bn rescue package for the critically threatened UK culture sector will be announced, but the plan is currently light on detail, and it remains to be seen on what basis the extra grants and loans will be allocated. It’s also already too late for some, with the Nuffield Theatre in Southampton announcing on 2 July that it would close permanently after over 50 years of operation.
Arguably the most innovative proposal came from the Resolution Foundation, a British think tank which suggested the government could implement a £30 billion “high street voucher” scheme that gives every UK adult a voucher worth £500 to spend on sectors badly affected by the lockdown, such as hospitality and in-person retail. A similar scheme was successfully implemented in China to aid that country’s economic recovery.
Summer Statement 2020: No extension to furlough scheme
After outlining the challenges ahead, Sunak announces that there will be no extension to the furlough scheme and it will, as previously stated, be flexibly wound down in October.
Prior to the summer statement, the UK's four largest unions (the TUC, UNISON, Unite, GMB and USDAW) collectively called for the furlough scheme to be extended for specific sectors, stating:
“[We must] extend the job retention scheme beyond October for businesses who have a viable future, but need longer to build back.
“This is crucial, especially in at-risk industries like the arts, aviation, aerospace, automotives and hospitality. And needs to be allied with a recovery plan for retail and the high street, which were struggling even before Covid struck.”
But, to no avail, the furlough scheme that has supported millions of employees will be tapered down and then ended on 31st October 2020.
Whether, as the unions warn, we then return to 1980s levels of mass unemployment remains to be seen.
Summer Statement 2020: £1,000 Job Retention Bonus for firms that bring back furloughed employees
Sunak announces that businesses which bring employees back off furlough and into continuous employment until January will be paid a £1,000 bonus per employee. For businesses to get the bonus, employees must be paid an average of £520 in each month from November to January.
Provided these conditions are met, the bonus will be paid for all furloughed employees.
If all nine million furloughed employees are brought back, this would be a £9bn policy to retain people in work.
Alex Theuma, the founder and CEO of tech startup community SaaStock was “pleasantly surprised” by this measure and suggested that it would support his efforts to bring furloughed employees back to work:
“We had to put some staff on furlough after our revenue dropped by 50% when lockdown was announced. Without the furlough scheme we would have had to let them go.
“We’ve bounced back by pivoting online and we’re looking forward to getting furloughed staff back on board in October. I was pleasantly surprised by the job retention scheme which will make it even easier for us.”
Similarly, Nic Smith, the managing director of Commercial Maintenance Services, said the move allowed the firm to continue its recovery plans with “greater confidence”:
“We had been considering taking on some trainees and bringing further staff off furlough as client demand continues to grow.
“However, the incentive announced by the chancellor to create meaningful jobs for young people and the bonus surrounding the unfurloughing of staff, have definitely given us greater confidence to plough ahead with our future plans.”
Summer Statement 2020: Kickstart jobs scheme officially announced
Sunak officially announces the Kickstart jobs scheme discussed in the introduction. Largely confirms what was already known, but adds that companies participating in the scheme will have to demonstrate that the placements are in addition to current position, and will get an additional payment to cover overheads.
He also reaffirms that employers can apply for the scheme next month.
Sunak also states that there will be no cap on the number of places available.
The scheme generated a mixed response, with some cheering the intervention and others concerned about the long-term impact.
Mike Cherry, the National Chairman of the Federation of Small Businesses (FSB) praised the “jobs first” approach but warned that the execution was crucial:
“We’ve always said that the Chancellor should take a jobs first approach to today’s intervention and that’s exactly what he’s done.
The Chancellor is absolutely right to stress that the job of getting the economy back on its feet has only just begun.
The key now is making sure these positive new measures work for all, especially the small firms that make-up 99% of our business community and employ 17 million people.
The job retention bonus must be easy to access. We can’t have paperwork holding up this vital support.”
However, serial entrepreneur, angel investor and host of the Good Luck Club podcast Simon Squibb suggested that the whole approach of subsiding placements was misguided and short-termist:
“In regards to today’s announcement, I can’t help but feel that the Chancellor, and the rest of Government, have missed a huge trick. There is nothing in there that even begins to mention the encouragement of enterprise, entrepreneurship or innovation, and that shocks me.
“This seemingly endless supply of money that the UK have will run out at some point, and I can’t help but feel that paying companies to hire people seems incredibly counter-intuitive, people don’t hire because of subsidies, they hire them because they need them for further growth and success.
“What’s the point of hiring someone if you’re still struggling under the strain of Covid-19? Once the subsidy finishes, what do we do – fire these people again because we can’t actually afford them?
“Instead, the government needs to be subsidising growth and success in other areas such an innovation and technology which will ultimately create thousands of new jobs which are more stable and secure.”
Michael Buckworth, the managing director of Buckworths, a UK law firms that works exclusively with startups and high-growth businesses was also concerned about the long-term impact of the scheme:
“The new kickstart scheme will help protect the younger generation from the brunt of the COVID-19 crisis. But the Government’s proposal to pay for the cost of 25 hours’ work a week for 6 months at National Minimum Wage for new traineeships risks locking young people into low paid, low hours jobs with little career progression.
“Instead, the Government should set an example to businesses throughout the UK and ensure that these trainees are fairly remunerated by covering the living wage and build in minimum standards for training and supervision.”
Summer Statement 2020: £1,000 traineeship funding officially announced
Sunak confirms another known measure, the £1,000 funding for each new traineeship placement a company offers.
He also adds that £100m will be provided to create more places for 18- and 19-year-olds on level 2 and 3 courses in high demand sectors such as engineering, construction, and social care.
Summer Statement 2020: New apprenticeship funding announced
Citing figures that show that 91% of apprentices stay in work or do further training after their apprenticeship, Sunak announces new funding for employers that take on apprentices.
- Businesses that hire “young apprentices” (presumably those under 25) will be paid £2,000 per new apprentice
- Businesses that hire apprentices over 25 will be paid £1,500 per new apprentice
Summer Statement 2020: Stamp duty threshold increased to £500,000
As expected, Sunak announces that the stamp duty threshold will be increased from £125,000 to £500,000 in order to revive the UK housing market.
The cut will be temporary, lasting until 31 March 2021.
Changes will take effect immediately.
Consequently, Sunak says that nearly 9 out of 10 people buying their main home this year will pay no stamp duty at all.
Undoubtedly, this is good news for estate agents worried by the recent fall in house prices and a potential decline in the overall UK housing market.
Ian Wardle, the CEO of housing provider Thirteen, which both builds and manages homes, cheered the move:
“Today’s announcement about the stamp duty holiday is very much welcome and builds on the government support announced last week of £12 billion to build new affordable homes over the next 5 years.
“This investment will help thousands of people to secure much-needed new homes, support many jobs in the construction and property sector and help alleviate the housing crisis.”
“Lockdown prevented 175,000 would-be sellers from coming to market so we hope this stamp duty holiday will provide the spur for those missing movers to come to market.
“They will find there’s currently record demand for their properties from prospective buyers, with Rightmove inquiries to agents now double what they were before lockdown.”
Estate agents will be watching closely to see if this supposed pent-up demand manifests itself in an increase in house prices and higher levels of buying and selling.
Summer Statement 2020: Six month-VAT cut for hospitality/tourism businesses announced
Noting that the hospitality and tourism sectors have been the hardest hit by the lockdown, Sunak announces a six-month cut in VAT from 20% to 5%.
He notes the following areas but suggests more will also benefit:
- Eat-in/hot takeaway food from restaurants, cafes and pubs
- Accommodation in hotels, B&Bs, campsites and caravan sites
- Attractions like cinemas, theme parks, and zoos
The cut will take effect on Wednesday 15 July 2020 and last until 12 January 2021.
Sunak describes the move as a £4 billion catalyst for the hospitality and tourism sectors, benefiting over 150,000 businesses.
Peter Webb, the managing director of Electronic Temperature Instruments (ETI), which is largely dependent on the hospitality industry, welcomed the move but warned the public must continue to act responsibly:
“These are unprecedented times therefore we need unprecedented measures. Hospitality businesses needed this welcome dose of reassurance and confidence in order to stabilise their business and support their workforces.
This VAT cut confirms the government’s commitment to getting behind British business throughout this ongoing crisis and helps stabilise employment and supports productivity within this space. Traditionally, approximately 80% of our business comes from the food and drink space; what we call ‘farm to plate’, so this move is welcomed. This will continue to be a challenging year, with industry demand in the second half and into 2021 remaining unknown.
We are now collectively relying on everyone to act responsibly when visiting hospitality outlets to ensure we don’t see another spike and that doors can continue to remain open to the public. Workers throughout this particular supply chain are counting on it.”
Charlene Lyons, the chief executive of Black Sheep Brewery, also praised the move, but noted the huge impact that beer duty has on the business:
“The VAT cut is a step in the right direction to reinvigorate our sector, but we’d have hoped the chancellor would have gone further with a cut to Beer Duty. We pay 40 percent of our turnover in duty, which means around £7m a year is lost to tax.
“A short-term cut would help with investment in our business that, in turn, helps our pub customers and our North Yorkshire supply chain.”
Summer Statement 2020: “Eat out to help out” discount announced to reduce cost of eating out in August
Stressing the need to think creatively, Sunak announces the “eat out to help out” discount to encourage people to eat out.
The rules are:
- The discount will only run during August
- The discount will only be available Monday to Wednesday
- The discount will be a maximum of £10 per head for each adult or child
Sunak later confirmed on his personal twitter that the discount will apply to sit-down meals and non-alcoholic drinks only.
Business can register online from Monday 13 July.
Each week in August, registered businesses can then claim the money back, with the funds in their bank account within five working days.
Phil Brumwell, the managing director of High Street Hospitality, hailed the both the “eat out to help out” scheme and the temporary cut in VAT. He stated:
“We sincerely value all the support the government has provided during the pandemic and have worked incredibly hard to prepare our venues to reopen after lockdown to ensure that they are safe and welcoming places for our customers.
“These new measures will play a really important part in encouraging people to eat out and book rooms for a break while supporting the hospitality sector. We will be registering for the government’s ‘eat out, help out’ scheme and look forward to welcoming diners into our bars and restaurants for what will be an exciting August!”
Evaluating the statement overall, Nic Redfern, the finance director of KnowYourMoney.co.uk praised the measures taken so far but warned that further action would be required in the full autumn statement:
“The looming threat of mass unemployment within the economic recession ever recorded is rightly attracting a lot of attention. In particular, the pandemic has decimated the retail and hospitality sectors, which typically employ young people – so it is the under-25s who the Chancellor is clearly keen to get back into work and keep them there.
“To that end, today’s announcement of the six month VAT cut for the sector, as well as the job retention bonus scheme was vitally important, especially those whose businesses are more seasonal. It certainly could not wait until the Autumn Budget, with employers needing incentives to bring their employees back to work with their doors safely open. A tax incentive for businesses, and the dining out vouchers for the consumer, can help younger people retain employment.
“Alone, however, it will not be enough; more must be done to ensure new jobs are made available to those who have lost theirs during the COVID-19 crisis. Importantly though, since March the Chancellor has given businesses and workers plenty of reasons to be confident that further, decisive action will be taken to help them out of this challenging situation.”