UK Government Support to Businesses During Covid-19
The COVID-19 crisis has shown us how inter-connected we really are across the world. It is amazing to think that a viral infection which started in a relatively unknown region in China is having such a devastating impact on us here in both the UK and globally. It has brought the world to a standstill.
The extent of the catastrophe is evidenced and mirrored by the extent to which UK Government has been forced to roll out an unprecedented programme of support never before seen in peace time.
It is difficult to over-state the impact that the COVID-19 virus has had on the UK and particularly businesses who are the engine of the UK economy, with mass closures of mortar store fronts and supply chains paralytic-ally disrupted. As such, among others, businesses should look to protect their business interest and come out of this crisis in the strongest possible position.
Businesses should avail themselves of new financial assistance programs the UK government has made available.
- The UK government recently announced a temporary 100% business rates relief for eligible retail, hospitality, and leisure businesses in England for the 2020 to 2021 tax year.
- Another financial relief program will allow for the deferral of VAT payments, so that payments due between March 20th, 2020 and June 30th, 2020 will now not need to be made until March 31st, 2021.
- The Small Business Grant Fund relates to all eligible businesses in England in receipt of either Small Business Rates Relief or Rural Rates Relief in the business rates system, which will be eligible for a payment of £10,000.
- The Retail, Hospitality and Leisure Grant Fund relates to all eligible businesses in England in receipt of the Expanded Retail Discount with a rateable value of less than £51,000 who will be eligible for a cash grant of £10,000 or £25,000 per property.
- The Coronavirus Business Interruption Loan Scheme provides eligible businesses with access to loans, overdraft, invoice finance and asset finance of up to £5 million for up to six years.
- The Coronavirus Large Business Interruption Loan Scheme will enable large businesses to access loans. All viable businesses with turnover of more than £45 million per year will be able to apply for up to £25 million of finance. Firms with a turnover of more than £250 million will be able to apply for up to £50 million of finance.
- The COVID-19 Corporate Financing Facility is designed to support liquidity among larger firms, helping them to bridge coronavirus disruption to their cash flows through the purchase of short-term debt in the form of commercial paper. Companies - and their finance subsidiaries - that make a material contribution to the UK economy are able to participate.
- The Coronavirus Job Retention Scheme allows UK employers to furlough employees and apply for a grant that covers 80% of their usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and pension contributions (up to the level of the minimum automatic enrolment employer pension contribution) on that subsidised furlough pay.
- The Coronavirus Future Fund which is to provide government loans to UK-based companies ranging from £125,000 to £5 million, subject to at least equal match funding from private investors. These convertible loans may be a suitable option for businesses that rely on equity investment and are unable to access the Coronavirus Business Interruption Loan Scheme.
- The Coronavirus Bounce Back Loan is intended to help small and medium-sized businesses to borrow between £2,000 and £50,000. The government will guarantee 100% of the loan and there will not be any fees or interest to pay for the first 12 months. Loan terms will be up to six years. No repayments will be due during the first 12 months. Businesses already claiming under the Coronavirus Business Interruption Loan Scheme cannot apply for this scheme.
In addition to the above measures, we recommend the following:
- Businesses should review their insurance policies to identify any coverage that may mitigate the financial impact of COVID-19, such as business interruption coverage. In some cases, there may be cover for pandemics but this will depend on the wording of your insurance policies.
- Businesses should review their property arrangements to identify any options for break clauses, rent deferrals and/or renegotiation of lease terms. The UK government has confirmed that commercial tenants who cannot pay their rent because of COVID-19 will be protected from eviction. This means no business will automatically forfeit their lease and be forced out of their premises if they miss a payment up until June 30th, 2020.
- Review your commercial arrangements in particular contracts provisions where you have been disappointed by your suppliers or it is you that have not been able to fulfil your contractual obligations. For a more in-depth analysis on the law surrounding your contractual obligations during the COVID-19 pandemic, please read our article on Force Majeure.
- The UK competition law rules have been relaxed to a limited degree, in order to permit supermarkets to share data on stock levels and co-operate on some logistics, sharing distribution depots and delivery vans in order to help meet consumer demand. In addition, we believe that exploring alternatives to legal redress such as collaborative efforts with existing suppliers and business partners is very important and may be highly beneficial to surviving this crisis.
Businesses need to understand what UK Government support and assistance is available to assist them at this unprecedented time in history. In addition, it is equally important to understand what the legal remedies that may be available to them as a result of the impact of COVID-19, including the consequences of decisions they take with regard to suppliers. As always, it's recommended to get advice and get it early.
If you require legal advice and assistance, please contact a member of our team 08456 808 251.
Please note this article is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this blog.