Old Mill Updates

COVID-19: Chancellor outlines how the government will boost job creation

Today in Parliament Rishi Sunak, announced a package of measures as part of his Plan for Jobs strategy which is worth up to £30 billion.

In a support package aimed to protect, support and create jobs the Chancellor outlined the next phase of the government’s plans to get the economy moving again as we emerge out of lockdown.

For full details of the Policy Paper click here.

Sunak confirmed that whilst the Job Retention Scheme has provided a lifeline for up to nine million people it would be irresponsible to extend furloughing beyond October as it’s now necessary to wind down the scheme in order to get people back to work and protect jobs.

8th July 2020

Job Retention Bonus

In its place the Chancellor announced the Job Retention Bonus of £1,000 per employee to reward employers who bring back furloughed employees and continuously employ them through to January. Workers shouldn’t just be returning to work for the sake of it; they need to be doing ‘decent work’. For businesses to receive this bonus, the employee must be paid at least £520 on average, in each month from November to the end of January (i.e. the equivalent of the National Insurance lower earnings limit).

‘Kickstart’ Job Creation Scheme

In addition, a £2 billion ‘kickstart scheme’ to create more jobs for young people comes into effect next month. As an incentive to encourage businesses to create new jobs for people under the age of 25, the government will pay the wages (and overheads) for six months with no cap on the number of places.

Further grants are also available to employers who are prepared to set up traineeships and take on apprentices. Firms will receive £1,000 to take on new trainees and £2,000 for each new apprentice hired.

Boost for the housing market

To help reinvigorate the housing market, Stamp Duty Land Tax (SDLT) will be cut immediately on purchases up to £500,000 until 31 March next year. By introducing this today, Sunak is ensuring that property sales don’t grind to a halt as there was some speculation that this measure would be introduced in the autumn budget.

It’s estimated that the average SDLT bill will fall by £4,500 with almost nine out of ten people buying a main home during this period not paying SDLT at all.

Stuart Grimster, Head of Owner Managed Businesses at Old Mill said ‘The changes relating to SDLT will be a welcome bonus to those already embarking on a sale or purchase of a home. Of course, the changes are more so designed to encourage new activity in the housing market. It remains to be seen whether the SDLT savings will simply translate into slightly higher prices being demanded by sellers, but in any event more funds will remain in the buyers and sellers collective hands, which can only be a positive for the economy generally.

One hopes, perhaps, that this may result in additional home improvements spend, which will be beneficial to general construction trades. The £2 billion Green Homes Grant will help here too. Also, don’t forget that the additional 3% SDLT charge on second homes still applies.’

VAT cut for hospitality

Almost two million people across the UK are employed in hospitality and tourism and 1.4 million have been furloughed during lockdown. The South West has been particularly hard hit so any support to stimulate demand is particularly welcome.

From 15 July VAT will be cut from the current rate of 20% to 5% for the next six months on food, accommodation and attractions. This reduction will last until 12 January next year.

Innovative ‘eat out to help out’ discount announced

In a move to get people back into pubs, restaurants and eateries, Sunak launched a scheme where people will get a 50% discount, up to £10 per head (including children), for meals eaten at any participating businesses. Pubs and restaurants will need to register online for the scheme from Monday 13 July, and then claim the discounted element back and they will receive the money back within five working days.

Old Mill’s Head of Food & Drink, Phil Mills said ‘While any initiatives put in place to help the country’s struggling pubs and restaurants are certainly welcome, I think there are some issues that need to be thought through.

‘Pubs and restaurants are usually pretty busy in August and with most people likely to opt for a staycation this year, I’m not sure pushing demand over the summer holidays is what’s needed. There is a danger that participating pubs and restaurants will see a huge spike in custom for a month which could mask the real state of the business, causing them to take back staff – encouraged by the £1,000 incentive – who they then cannot afford to keep once the ‘eat out to help out’ discount is finished.

‘What the sector really needs is more sustained initiatives that drive demand, not just in August, but throughout the rest of the year, allowing businesses to find their feet without being lulled into a false sense of security by short term measures. What we don’t want to see is businesses taking on staff to cover a busy August, and then have to let them go when they realise that their model is not sustainable, causing further issues for an industry already struggling to know what the new normal looks like.’

For more information, or if you have any questions about any of the above, please contact your Old Mill adviser or email enquiries@om.uk.