Corona Virus Financial Help

On 17 March, Rishi Sunak Chancellor of the Exchequer for the UK announced unprecedented emergency measures to help protect small and medium enterprises from going to the wall by releasing £330 Billion, up £300 Billion from the budget the week before, representing 15% of the U.K.’s gross domestic product (GDP). This came a day after President Macron offered to inject €300 billion into the French economy.

These measures were introduced as on Monday 16 March, the Prime Minister, Boris Johnson announced pub, theatres and restaurants would close and employees to work from home to promote individual and family isolation. The aim is to prevent the spread of the Corona virus (Covid -19) and changing government strategy from mitigation to suppression to prevent unnecessary mortalities.

As part of these economic measures to increase cash flow and liquidity for businesses, the Chancellor offered the following support;

  • Business rates concessions/ business rates holiday
  • Tax cuts as part of a fiscal stimulus programme
  • Government subsidies - cash advances
  • Government backed loans
  • Insurance claims being permitted

This financial support is quickly being introduced to assist businesses with employee continuance, and the payment of rent and loans. It is widely accepted that many businesses will struggle to pay staff and they may simply decide to cease trading and close in view of the bleak outlook, with some medical experts advising that this unprecedented situation, not seen in our lifetimes could go on for 18 months or so.

Access To Cash

The Exchequer agreed to provide cash strapped businesses with government backed loans or credit and promised to provide “as much capacity as required”. For small and medium businesses, this includes loans of up to £5 million with no interest being charged for six months and these are to be made available through High-Street retail banks from the start of next week. The Exchequer is expected to announce further details very shortly.

For larger firms, the Exchequer promised to provide liquidity by offering low-cost and easily accessible loan paper, pledging to do “whatever it takes” to assist businesses whilst the government attempts to protect the public and introduces critical measures at breakneck speed.

The Chancellor recognised that many businesses especially in the leisure, retail and hospitality sectors would suffer as a result of pubs, restaurants and theatres closing. Some businesses have already laid off staff and retailers such as Apple have already closed their retail stores until further notice.

Insurance Claims

The Exchequer said he had spoken to the representatives for the Insurance Industry and that businesses who had coverage for business interruption insurance for the epidemic should be paid out, which contradicted the view of insurers the day before that this had been an Act of God and therefore excluded as a force majeure. The insurers will need to make their position clear in view of the floodgates situation which could very easily wipe out underwriters, and may lead to the government bailing out insurance companies.

It is therefore vitally important for businesses to immediately check their insurance terms and conditions and coverage clauses, including the terms of exclusion to see as to whether you are able to make an insurance claim for financial losses sustained under your “business interruption” coverage clause.

Business Rates Holiday/relief

The Exchequer also promised business rates holidays for all sectors, not just those in the hospitality, leisure and retail industries and having announced particular assistance for smaller businesses being identified with a rateable value of no more than £51,000.

Cash Advances

The Exchequer has also promised cash grants of between £25,000 and £10,000 for smaller businesses to assist them with cash flow and staff continuity, and to meet their rent for business premises. For most businesses, the largest costs are rent and staff costs which risk being unmet due to cash flow shortage.

Tax Cuts and Grants

The Exchequer made 20 billion available in cuts and grants although made it clear that would do whatever possible to ensure that profitable businesses continued, and that if he needed to find more money he would do.

Staff Costs and Employment Support Packages

A great number of businesses have turned around to their employees having stated that if they do not turn up to work they will only be able to claim Statutory Sick Pay (SSP) of £94.25 per week.

The Government has announced that you should stay at home if you have either:

  • A high temperature – you feel hot to touch on your chest or back
  • A new, continuous cough – this means you've started coughing repeatedly
  • If you have symptoms, to stay at home for 7 days
  • If you live with other people, you should stay at home for 14 days from the day the first person had symptoms
  • If you live with someone who is 70 or over, has a long-term condition, is pregnant or has a weakened immune system, try to find somewhere else for them to stay for 14 days.

The Exchequer has promised to provide cash grants to assist paying employees whilst businesses are unable to trade due to closure or staff being ill or in isolation and to help meet fixed costs. It was said that these payments would be made quickly with the aim being not to destroy businesses by laying off staff. It is said that many businesses have already laid off staff such as freelancers in the theatre industry as a result of temporary closure and the government is keen to prevent large-scale unemployment.

It had also been announced by the Chancellor of the Exchequer that members of the public in financial difficulty would not be required to pay their mortgages for a period of three months, being referred to as a mortgage payment holiday, and that he was working closely with the banks to ensure they fully cooperated.

The Exchequer said he is to consult with Unions and the Confederation of Business and Industry (CBI), the Institute of Directors (IOD), and the Federation of Small Businesses to monitor the fast pace situation and provide even greater financial support where needed, having said that this would be a national effort underpinned by the government’s desire to be bold and to show courage.

Many entrepreneurs and business persons will now be taking expert advice in weighing up the pros and cons of whether to continue in business or cease trade, particularly as many commentators have already flagged up the prospect of businesses borrowing monies whilst being uncertain of repayment and not wishing to be saddled with any further debt.

Please do not hesitate to contact us if you require independent legal advice to assess your particular situation and to make enquiries on your behalf or to negotiate with the HMRC, your bank and your creditors or staff. It is often the case that an independent and objective person is best placed to look at matters dispassionately to help you best navigate in these unprecedented and stressful times.

Initial Confidential Discussion

Please either email or telephone us for a no obligation initial discussion to see how we can add value to your business.

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