Rishi Sunak's Winter Economy Plan - an overview

Claire Ralph
Policy Manager | Business West
25th September 2020

The Government’s latest intervention to help businesses and the economy endure the next six months’ of COVID-19 restrictions is likely to be inadequate to stave off widespread unemployment within the South West region, but Business West welcomes extensions to employment support and assistance for business cash flow.

The most significant announcement is the much needed follow on from the furlough Job Retention Scheme. This new Job Support Scheme starts on 1 November and runs for six months, is considerably less generous than its predecessor. Employers pay staff under the scheme their full salary for at least 33% of their contractual hours, with the costs of residual time being split between employers and the government. Overall, the employer bears at least 55% of the salary costs of employees using the scheme, and the Government pays 22% (in arrears upon the claim being approved by HMRC, so the employer has to cash flow the scheme as well). There is a cap on the Government contribution of £698 per worker per month, translating to a similar salary threshold as under the furlough scheme. 

The Job Support Scheme operates across all sectors, rather than more support for badly affected sectors, and with much more of a burden on the employer, and less via the Government subsidy there is a concern for how useful the scheme will be for particularly badly affected sectors of our regional economy such as aerospace, the night-time economy and cultural and heritage industries. These sectors contribute so much economic output and provide hundreds of thousands of jobs to our region, and so for employees who remain on furlough from their roles in these sectors the future looks particularly bleak heading into the winter. 

All small and medium entities can claim the Job Support Scheme, and can claim for all workers whether or not they were furloughed, as long as they work at least 33% of their hours for full pay. For the region’s larger entities the use of the Job Support Scheme is conditional upon them demonstrating ‘that their business has been adversely affected by COVID-19’. For large employers looking to use the scheme the Government expects that they ‘will not be making capital distributions (such as dividends), while using the scheme’. We recommend businesses in our region looking at the scheme keep an eye on guidance as further details emerge. Suffice to conclude the Chancellor isn’t attempting to target support to where it is most likely to be needed, either by sector or by size of employer. Employers can claim the Job Support Scheme alongside the Job Retention Bonus in many cases for the same workers, although cannot use the scheme for employees who have been served a redundancy notice.

Extensions to the Self Employment scheme (although quite limited in generosity with only 20% of average trading profits being able to be claimed for November through to the end of January, with a lump sum payment in February; details for the February to April scheme to be announced later) and the Government backed loan schemes are welcome to assist cash flow for struggling businesses. Businesses who have taken out Government backed loans such as the Bounce Back Loan Scheme, or made use of tax deferrals have the option of longer repayment terms and can apply for payment holidays if in distress. These flexibilities could be critical to prevent insolvencies in vulnerable businesses but extend the overhang of debt further into the recovery phase.

Overall the scale of today’s announcement was very much smaller than those made in July and March, and comes at a time when businesses face unprecedented levels of uncertainty with the end of the transition phase. The schemes are welcome, if a bit overdue and we hope it will help some employers and businesses make it through to Spring 2021. The Autumn Budget and Comprehensive Spending Review have been cancelled, so the next fiscal event when we will see how the support will be met through inevitable tax rises or spending cuts will have to wait until the worst of the public health crisis is behind us.

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