Last week, Rishi Sunak, Chancellor of the Exchequer announced £50bn of stimulus packages to support immediate growth in the UK economy targeting the sectors which have suffered the most during lockdown.
Aimed at boosting construction and housebuilding output, Stamp Duty was reduced to 0% for all house purchases up to £500,000. Surprisingly this cut also applies to “second home” and “buy to let” purchases, although the 3% stamp duty surcharge still applies.
Another eye-catching announcement is the temporary VAT reduction from 20% to 5% for all Licensed and Leisure sector businesses which take effect from the 15th July. This move surprised many who had expected a lower reduction and already we have seen a number of corporate chains announce that they will be applying the full 15% reduction to their prices.
In addition to the VAT reduction, Sunak also announced an unprecedented “Eat Out to Help Out Scheme” which aims to stimulate early week dining with a £10 per head allowance for all UK adults and children who eat out in registered restaurants/pubs Monday to Wednesday during August. This is quite a clever move by Rishi Sunak as it will stimulate early week trade, kickstart a return to pubs and restaurants and will reduce the level of furloughed workers as staff are brought off furlough to operate a seven-day trade.
Employment stimulus packages were also on the agenda with clever packages aimed at incentivising employers to recruit sub 25 year old workers who are registered for Universal Credit. This will give our young people the opportunity to gain valuable work experience as well as assisting employers. Additional measures were announced to facilitate an increase in apprenticeships. Finally, the Coronavirus Job Retention Scheme Bonus of £1000 per furloughed employee was rolled out at a potential cost to the taxpayer of £9bn if all furloughed employees are retained as at 31st January 2021.
It is refreshing to see such proactive policies aimed at stimulating demand for SME businesses but in reality the announcements made last week are aimed at short term boosts for a small number of sectors while the Treasury assess the full impact of the Covid19 outbreak and prepare an Autumn budget which will set out how the Government intend to repair the significant damage to the balance sheet of UK PLC.
Author: Andrew K Steen, Sales & Marketing Director
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