Updated 17.03.2020.
- Chancellor announces £330 billion extra in support for individuals and business.
- Small traders can access grants up to 10K
- SMEs can apply for grants up to 25K
- Three month mortgage break for homeowners
- Renters & self employed likely to get more help after Sunak consults with Unions tomorrow
- One year holiday from business rates for companies
The moves will come as a huge relief to smaller companies and the self employed sole traders who make up the majority of UK businesses. As the leisure and hospitality sector has been hit especially hard, the chance of 25K cash injections could just be enough to help some companies survive the rest of the year. Others may need a loan, if they’ve already borrowed to buy stock, pay upfront to hire venues or have a significant number of full-time staff.
The big question for every business, and self employed person is simple; how long are we expected to trade without any income?
The answer is that nobody knows. But what is certain now is that Rishi Sunak has tackled the thorny issue of business interruption insurance head on and firmly placed the government in the position of ultimate underwriter. This is good news for insurers and brokers alike, although looming Trade Credit claims may yet cause some turbulence.
Sunak stated that `where businesses have insurance that covers pandemics then the government’s actions will trigger a payout on policies. But many companies do not have that type of insurance. So we need to do more. Businesses in the retail, leisure and hospitality sectors will have an additional cash grant per business, and extending the 12 months business rates holiday – to all businesses.’
The Chancellor also stated that if more financial support was needed then money would be found. It is arguably the biggest Keynsenian intervention since the late 1940s, when the welfare state was established and many industries nationalised following the end of WWII.
Taking questions from the mainstream media at the Daily Briefing, Rishi Sunak was asked if he saw any merit in the US idea of helicoptering cash into individual bank accounts. Sunak said he would look at `sending cheques out to people, but it isn’t my first preference.’
IE Note; It was an accomplished performance this afternoon from Chancellor Rishi Sunak who is looking more like a Prime Minister with each day that passes. Unfazed by any questions and happy to explain and clarify background detail on the emergency package, Sunak is a refreshing change to most modern politicians, who seem more interested in point scoring, than offering workable solutions.
There is no doubt that companies large and small will suffer from this unexpected downturn in the global – and UK – economy, caused by Corona Virus. But such bold measures announced today will give many people confidence that most of us can get through this year financially.
BUDGET STATEMENT
UK Chancellor Rishi Sunak set out a blueprint for economic growth, accelerating new business ideas and innovation, raising earnings slightly – plus as emergency measures aimed at fighting the immediate economic effects of the CoronaVirus.
For self-employed people self-isolating from the virus, access to benefits will be made a bit quicker. For those in employment, Statutory Sick Pay will be paid from day one, whilst small businesses will have their SSP costs met for 14 days if employees need to be sent home.
The truth is that those living hand-to-mouth, or with capital tied up in their business, will be hardest hit by any mass shutdown of business, travel bans, cancellation of events and shows etc. even if it is only for two or three weeks. Brokers would do well to use this example of government facepalming to sell income protection to many self-employed workers – let’s face it, unless you have savings, you are in deep trouble after a month without significant income.
On the upside, loans will be made available for smaller companies via Lloyds/NatWest groups, and HMRC will be told to accept deferred payments on VAT or CT without penalty. More good news for SMEs in the longer term was also on offer in the shape of 3K grants, abolition of business rates below £51K rateable value, plus major investments in regional business/R&D hubs, and the continuation of the entrepreneurs tax relief scheme, although it is being capped at £1m.
BOOM AHEAD FOR COMMERCIAL INSURANCE SPECIALISTS
For those working in the Commercial insurance sector the Budget was excellent news, with a total Treasury investment in the UK of about £600 billion.
From new roads, pothole funds, regional R&D centres at Universities, 40 new hospitals, GP surgeries, hazardous cladding removal, new electric vehicle charging infrastructure and so on, there are likely to be many large scale construction, refurbishing and renovation projects up for tender – not just HS2.
A total of £5.2 billion is to be spent on flood defences across the regions, over the next five years. Hotspots such as Calder Valley in Yorkshire are expected to be targeted. Some £2.5 billion will be allocated in a special pothole fund, with £27 billion set aside for strategic roads construction projects.
There will be a special £1 billion fund for the removal of unsafe materials from high rise buildings. More cash is to go into social housing too, but at just 70,000 units nationally, it is hardly likely to change the blunt unaffordability of renting or owning housing for many people on sub 20K incomes.
However the Chancellor made no mention of the IR35 changes, which appear to be going ahead. This will put contractors on the same tax and NI regime as employees, and is likely to see many freelance contractors re-think their business strategy, or take a major hit on tax and NI, whilst accepting NO sick pay, gym memberships, paid holidays, dental plans etc – all the stuff that most employees with a contract are getting.
Companies in utilities, construction, buildings maintenance, IT and other industries, may well have to factor in extra sub-contractor costs into their bids and tenders. Brokers who specialise in freelance insurance cover can expect to see demand for Sole Trader policies, rather than Ltd company products. Sole Traders are unaffected by IR35. For now.
LET THE LONDONISTA PUBLIC SECTOR EXODUS BEGIN
One highly significant announcement was the removal of some 22,000 civil servants from London, with relocation to regional government offices being compulsory. There will also be regional Treasury offices, staffed by about 750 people, so that the government can get closer to local business and public sector departments in order to allocate resources better.
Expect fierce, bitter resistance from senior public sector staff on this matter, as nobody earning 50K or above will want to get off the London property ladder and live in Sunderland, Swansea or Belfast instead. Many Londonista Remainer public sector staff will be utterly horrified at the prospect of living and working with people who voted for Brexit too, such are the levels of contempt for `provincials.’
Sunak also announced that West Yorkshire would get its own Mayor, complete with all the financial trappings that entails. There will be a £4.2 billion pot of cash available to all seven Metro Mayor regions to develop local transport infrastructure, such as trams, EVs, cycle lanes and such like. There was also extra funding for NI, Wales and Scotland, so that devolvbed regions may pursue their own pet projects.
Reduction or abolition of IPT? Nope. Abolition of IPT on electric cars to stimulate demand? No again. Opportunity missed there. How about an internet shopping tax which could raise funds to transform UK High Streets into leisure-focused and community activity areas instead? No solutions offered, so the slow death of bricks and mortar retail will continue.
On the upside, fuel duty is being frozen so those of us stuck with older petrol/diesel cars can afford to drive them until electric cars are produced in large numbers and the RRP drops below 10K. There was a brief mention of extra cash for electric car charging infrastructure, but no details on how many points, where they may be located, or whether some sort of universal adapter policy might be brought into play.
RAC BUDGET RESPONSE
Commenting on the announcement in today’s Budget that fuel duty will be frozen for a further year, RAC head of policy Nicholas Lyes said:
“We welcome the Chancellor’s freeze in fuel duty which will be a relief to drivers up and down the country. While the Chancellor might have been tempted to increase duty, the reality is that for millions this would have simply increased their everyday driving costs and done nothing to encourage them to switch to cleaner vehicles. And while many want to seek alternative transport options to using their vehicles for some journeys, in so many parts of the country reasonable public transport provision simply does not exist.”
ABI RESPONSE
No change in the rate of Insurance Premium Tax (IPT):
“Millions of insurance customers who do the right thing and take out insurance will be pleased to see that the rate of IPT has not been raised in this Budget. The Government should consider reducing IPT, as it is a regressive tax that hits the poorest households hardest.”
On the increase in Government investment in flood defences
“We welcome this much-needed extra investment in Britain’s flood defences. The investment of £5.2billion over the next six years will come as some relief to those communities across the country at flood risk who live with the distress and disruption that flooding causes. However, this still falls short of what the ABI has said is needed, £1.2bn a year, to meet the growing risk of climate change. We look forward to seeing further details on this announcement.”
Commenting on other issues of interest, Yvonne Braun, ABI’s Director of Policy, Long-Term Savings and Protection, said:
Taper Annual Allowance
“Short of abolishing the overly complex Tapered Annual Allowance, these measures are the next best step. However, further tinkering with pensions tax relief is not a long-term solution. The system needs fundamental reform.”
Net Pay Consultation
“We warmly welcome this call for evidence as a first step towards closing the yawning gender pensions gap. It is unacceptable that 1.75 million low earners are currently missing out on pensions tax relief, three quarters of whom are women. We look forward to engaging with government as they work towards a solution.”
Increase in annual limit Junior ISAs and Trust Funds
“We welcome the increases in the annual limit to encourage a new generation of savers and build good savings habits to last a lifetime.”
CBI COMMENT
Dame Carolyn Fairbairn, CBI Director-General, said:
“In deeply challenging times the Chancellor has worked against the clock to deliver two Budgets in one: a first for national resilience today and a second for economic ambition tomorrow. It’s a bold Budget at scale, coordinated with the Bank of England, which will help people and business through tough times.
“As the UK responds to the immediate challenge, people are the first priority. So the measures to expand and ease access to sick pay and benefits are vital to protect people’s health and livelihoods.
“The Chancellor’s actions on business rates, emergency funds and loans will help ensure firms can weather the storm, especially smaller firms. Larger firms may also need support as the situation develops.
“Covid19 will bring new challenges daily which will need to be resolved, at speed. “Today’s impressive economic response should now evolve with business insight to become as agile as our approach to public health.
“While the response to Covid19 is urgent, it is very good to see this Budget’s focus on innovation and infrastructure. The Chancellor has listened to many calls from CBI members, with decisive action on vital long-term issues.
“The significant uplift in R&D funding, creation of a UK version of ARPA, a fundamental review of business rates and spending promises on infrastructure will all bring real benefits to people, business and communities.
“The Chancellor has set out some powerful incentives to get businesses investing, increasing the R&D tax credit and the Structures and Buildings Allowance. The £5bn of new export loans will encourage the best of UK business to look to new global markets.
“The next few months will bring opportunities for the Government to make major decisions that they have understandably had to put to one side today. Some gaps still need to be filled in around skills, energy efficiency and powering the UK’s low carbon future.
“Overall, today’s Budget is a powerful signal to firms at home and abroad that the UK can and will manage the immediate challenges and long-term opportunities in parallel.”
BIBA RESPONSE
British Insurance Brokers’ Association (BIBA) CEO, Steve White, said:
“We welcome new Chancellor, Rishi Sunak’s approach to Insurance Premium Tax (IPT). Not changing the current rate – already at a significant 12 pence in the pound of every premium paid will help businesses and consumers to afford the insurance protection they need. We will, however, bear in mind that the Chancellor has not explicitly frozen the rate and we will continue to campaign for Government to freeze, if not reduce, the rate of IPT for the remainder of this Parliament.
We will also continue to highlight to the highest levels of Government the dire consequences of a tax that potentially reduces access to insurance.
In our 2020 Manifesto – Access, BIBA highlighted research by Zurich that shows a correlation between steady increases in IPT and a decline in the uptake of insurance. Because of this, as well as freezing the rate we believe targeted tax relief on both cyber insurance and telematics-based motor insurance would alleviate this trend.”
FLA COMMENT
Commenting on the Budget, Stephen Haddrill, Director General of the Finance & Leasing Association, said:
“The measures announced to help the NHS, consumers and businesses to deal with the likely disruption of coronavirus are very welcome. However, banks are not the only business finance providers, so the temporary Coronavirus Business Interruption Loan Scheme, in which banks will offer loans of up to £1.2m to support SMEs, would reach far more firms if non-bank lenders were also included in the plan.
“Supporting customers over the next few months will be absolutely vital – especially for those whose income is severely affected by the coronavirus disruption. FLA members are there to help, so it’s important to keep talking to your lender.”
COMMENT FROM INSTANDA
Tim Hardcastle, CEO and founder of INSTANDA commented: “As an insurtech, naturally we are supportive of anything that promotes innovation, particularly within the insurance industry. It’s therefore great to see increased measures introduced yesterday that benefit both R&D investment and tax credits and will in turn will play a significant role in supporting future innovation.
“Whilst the help is of course welcomed and will be important for the insurance industry, I believe that there is more that could and should be done from within to foster innovation, stimulate growth and frankly be a better industry all in all. In particular, insurance carriers need more options available to them to address the challenge of creating secure and scalable technology solutions. This is a challenge for which a solution is far greater than simply receiving more R&D support. It requires a mind shift more generally, one in which the industry opens up and embraces technological developments that are already readily available to them here today.
“Over the last three years in particular, we have seen an increase in insurers recognising the importance of working with insurtechs to drive digital transformation and bypass outdated legacy systems. This is promising, but there is still further to go. Ultimately, the winners will be those who embrace this technological evolution, and innovation will only truly be embedded once this mind shift takes force across the industry as a whole.”
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