Rishi Sunak

Industry reacts to Sunak's Winter Economy Plan

In a speech made in the House of Commons, chancellor Rishi Sunak has outlined the Winter Economy Plan.

He announced that he will extend the deadline of CBILS to the end of the year, and will lengthen the government guarantee on these loans for up to 10 years, making it easier for lenders to give people more time to repay.

The chancellor also introduced Pay As You Grow — through this, Bounce Back Loans can now be extended from six to 10 years, nearly halving the average monthly repayment.

Businesses who are struggling can now choose to make interest-only payments or can apply to suspend repayments altogether for up to six months.

Almost half-a-million businesses have deferred more than £30bn of VAT this year.

The government will allow businesses to spread the VAT bill over 11 smaller repayments, with no interest to pay.

Self-assessed income taxpayers who need extra help can also now stretch out their outstanding tax bill over 12 months from next January.

For the hospitality and tourism sectors, Sunak has cancelled the planned VAT increase — previously set to happen on 13th January — and will keep the lower 5% VAT rate until 31st March next year.

The chancellor has also announced the replacement of the Covid-19 furlough scheme with the new Jobs Support Scheme.

Through this, employees must work at least a third of their normal hours and be paid for that work, as normal, by their employer.

The government and employers will then increase those people’s wages, covering two-thirds of the pay they have lost by reducing their working hours.

Employers retaining furloughed staff on shorter hours can claim both the Jobs Support Scheme and the Jobs Retention Bonus.

The scheme is available for all small- and medium-sized businesses, even if they have not previously used the furlough scheme.

It will be available for larger businesses only when their turnover has fallen through the crisis.

The Jobs Support Scheme will start in November this year and will run for six months.

“…Our task now is to move to the next stage of our economic plan, nurturing the recovery by protecting jobs through the difficult winter months,” said Sunak.

“We need to create new opportunities and allow the economy to move forward, and that means supporting people to be in viable jobs which provide genuine security.”

Industry reaction

Overall, the specialist finance industry has responded positively to the chancellor’s announcement.

Ravi Anand, managing director at ThinCats, said these were welcome changes to the government loan schemes, stating that the chancellor had “listened to what lenders have been requesting”.

"The extension of the application deadline, although modest, will enable more businesses to access funding. 

“The flexibility on payments and terms will help businesses manage their costs and give lenders more confidence to support companies out of the pandemic, enabling long-term and sustainable growth.”

Karen Noye, mortgage expert at Quilter, shares Ravi’s opinion and said that Sunak’s pledge to subsidise up to two thirds of a wage packet for another six months is good news for homebuyers and sellers, even if they aren’t directly involved in the scheme themselves.

“Mortgage lenders are cautious about lending to people at risk of job losses, and anyone that is made redundant will struggle to obtain a mortgage. 

“Generally speaking, first time buyers would expect to be most affected here, both because they represent riskier borrowers with higher LTV and loan-to-income ratios, but also because younger people are more likely to be working in sectors like hospitality where the risk of redundancy is significant.”

Luke Davis, CEO at IW Capital, commented: "These measures will be a relief to many businesses and especially small businesses that have struggled in the past six months to continue trading. 

“The last thing any business founder wants to do is close their doors or make workers redundant, and so continued support will undoubtedly be welcomed.”

Chirag Shah, CEO at Nucleus Commercial Finance, agreed that the plans outlined by the chancellor were welcome news for business owners throughout the country who were looking for access to fast and flexible finance now, more than ever.

“As fears of a second wave become reality, businesses across the country are fighting for survival. 

“SMEs are the backbone of our economy, and we hope these measures will provide British businesses with the support they need at this challenging time.”

Genevieve Morris, partner at tax and advisory firm Blick Rothenberg, said: “I am delighted to hear that the ‘cliff edge’ that businesses and individuals were facing next year, with the repayments of the CBILS and deferred tax liabilities falling due in Q1, has been removed.  

“This was a daunting thought for many businesses who are facing a bleak winter and will be welcomed by many to help smooth the cashflow demands they face.”

Joshua Elash, director at MT Finance, has a different opinion: “Contrary to the chancellor’s assertions, now is exactly the time to lay out a long-term plan so as to prevent us from continuing to lurch from one expensive knee-jerk reaction to another.  

“The Jobs Support Scheme won’t protect viable jobs in the long run, and it certainly won’t create jobs; it’s simply helping create a zombie economy.

“We should be investing these huge sums to improve and create safer travel and working conditions in a way which would leave a positive legacy.”

Chirag agreed that the chancellor must also deliver long-term plans to ensure that SMEs can not only survive the coronavirus crisis, but thrive for years to come — “this is where the alternative finance industry has a vital role to play."


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