Coronavirus and the Economy: What's the Next Step for UK?

Posted by Maria Katrina dela Cruz
Apr 24, 2020
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Several small businesses were forced to shutdown as a temporary lockdown was imposed in the UK. The British government is now navigating around the global hurdle as the coronavirus (COVID-19) wreaks its economic growth.

coronavirus and the economy of the UK

Related: Coronavirus (COVID-19) and Its Impact on the US Economy So Far 

Despite being a developed country, the UK is among the countries with high mortality rates due to the COVID-19 pandemic. Businesses are out of the game as of the moment, bringing more unemployment numbers and lost trades on the list.

The global economy is now in recession and this crisis has now reached both ends of the world. It is expected to dramatically pipe down by the third quarter of the year, but its effect is predicted to last until 2021.


Financial Market Hits

With the surrounding uncertainty brought about by COVID-19, a significant dip in numbers at the financial market was seen since the start of 2020. 

FTSE 100 and FTSE 250 experienced major declines since the outbreak started last December 2019. The UK witnessed a big drop of their figures from 53.0 in February to 36.0 in March, which is now translated as an ‘economic crisis’

However, despite the biggest decline the UK has seen since 1987, the FTSE 100 ended the week with a positive 2.30% record and the FTSE 250 showing a 1.21% gain. 

The UK has also slashed Interest rates to make borrowing cheaper and encourage spending, thus boosting the economy. Though they are still 25% down compared to the record high last January, economies were able to somehow recover through the $2 trillion rescue aid of the US.  


Employment and Business Impact 

Before the lockdown implementation, a record high of 76.4% to 76.6% of employment rate was reported by the Office of National Statistics (ONS). As the Coronavirus temporarily shut the businesses down, unemployment numbers rapidly escalated from 3.9% to 4.0% this March. 

The majority of private firms ceased operating in response to the lockdown, leaving 13 million jobs affected. 30% of the firms furloughed 75% to 100% of their workforce which meant a raise in companies accessing the new Coronavirus Job Retention Scheme (CJRS) managed by the HM Revenue and Customs (HMRC). 


HMRC’s Coronavirus Job Retention Scheme

To support the affected businesses, the CJRS program provides companies a grant to cover the wages of employees who are in furlough due to the pandemic. This is HMRC’s effort to retain existing employments and to safeguard the UK economy. 

According to the HM Treasury, the CJRS ‘allows employers to claim for a cash grant of up to 80% of a furloughed employees wages, capped at £2,500 a month’. This scheme is available to all UK employers from March 1 and is extended until June 30, or until the government deems it necessary.


Coronavirus Business Support

Aside from the wage grant for the employees on temporary layoff, the HMRC, together with the supporting ministries and government organizations, provides a suite of Coronavirus business support to keep firms on the ground.

Here are the UK-wide financial supports the government grants to companies:


Paying Tax

HMRC offers VAT deferral to registered businesses due to the Coronavirus, provided that you pay your due on or before March 2021. You also have the option to pay the VAT due as normal.

For the Self Assessment tax bill, you can delay making your second payment on account. If you choose to delay, you’ll have until 31 January 2021 to pay it.


Support for the Self-employed

This scheme will allow you to claim a taxable grant worth 80% of your trading profits up to a maximum of £2,500 a month. It will be available for 3 months but may be extended.

The grant will be subject to Income Tax and National Insurance contributions but does not need to be repaid.


Support for Small and Medium-sized Businesses

  • For the Coronavirus Business Interruption Loan Scheme:

The Coronavirus Business Interruption Loan Scheme (CBILS) supports small and medium-sized businesses, with an annual turnover of up to £45 million, to access loans, overdrafts, invoice finance and asset finance of up to £5 million for up to 6 years.

The government will also make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees. This means smaller businesses will benefit from no upfront costs and lower initial repayments.

  • For the Coronavirus Future Fund:

To be launched in May, the Future Fund will provide government loans to UK-based companies ranging from £125,000 to £5 million, subject to at least equal match funding from private investors. The scheme will be delivered in partnership with the British Business Bank.


Support for Large Businesses

  • For the Coronavirus Large Business Interruption Loan Scheme (CLBILS):

All viable businesses with a turnover of more than £45 million per year can apply for up to £25 million of finance. Firms with a turnover of more than £250 million can apply for up to £50 million of finance.

The scheme is available through a series of accredited lenders, which are listed on the British Business Bank website. The government provides lenders with an 80% guarantee on individual loans. This gives banks the confidence to lend to many more businesses that are impacted by the Coronavirus. Facilities backed by a guarantee under CLBILS are offered at commercial rates of interest.

  • For the COVID-19 Corporate Financing Facility:

Under the COVID-19 Corporate Financing Facility (CCFF), the Bank of England will buy short-term debt from large companies. This scheme will support your company if it’s been affected by a short-term funding squeeze, and allow you to finance your short-term liabilities.

It will also support corporate finance markets overall and ease the supply of credit to all firms. The scheme is delivered through commercial lenders, backed by the Bank of England. 

Access the full list of HMRC’s business grants for UK-based companies here

The intensity of this pandemic is yet to reveal itself in the coming months, or even years. We are yet to witness how the coronavirus and the economy will progress over time, and how it will change our processes and strategies. 

Keeping track of your finances can be challenging, especially at this difficult time. That’s why we’re here to help. D&V Philippines provides specialised finance and accounting solutions designed to help you during this global pandemic

You can download our guide Outsourcing: How to Make it Work to learn how outsourcing can drive your business forward. 

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