Yesterday, the Chancellor, Rishi Sunak, delivered a mini-budget that on the face of it appeared to deliver a great deal of aid to struggling businesses. But did it really?

Just 24 hours later and the bones of the package are being pulled apart by all and sundry. Most notably, the Labor party saying that it isn’t focused enough. This post isn’t politically inspired, far from it; it’s business inspired. But is there a point here? Will it deliver the much-needed assistance to the companies that need it?

Let’s have a quick look at some of the points affecting businesses.

Ending the furlough scheme and the job retention scheme

Well, free money had to end sooner or later, we all know that. However, that does mean that businesses now have a stark choice to make. To restart employment for millions currently furloughed or simply letting them go.

Nothing particularly positive has happened to the business environment to warrant a company suddenly returning to where they left off before the crisis. If anything, it’s got much worse. We are facing a recession as bad if not worse than that of the ’80s.

Retail businesses may be able to open, but their footfall is severely reduced:

• By a general reluctance to visit a store, due to the uncertainties that remain around the virus.
• In-store customer flow control and protective measures.

Neither is conducive to business as usual. Let’s also not forget that a lot of high street businesses were already struggling because of the trend of internet shopping.

So, on the one hand, with nothing much happening to change the pre-Covid business environment (in fact the opposite), and on the other hand a raft of measures to encourage employees to retain staff . . . are they likely to?

The Chancellor has offered businesses £1000 for every employee furloughed that they keep continuously employed until January 2021, as long as they are earning at least £520 a Month from November to the end of January. The question is, ‘is £1000 even an inducement to do so?’.

This is where the argument gets going. If you have work for employees that you’d naturally keep until February, then you’d likely keep them anyway! So why do they need the money in the first place? It’s a nice bonus, for sure, but isn’t that a bit of a waste? At least that’s one of the questions bouncing around the papers and the opposition party.

If you are the owner of an SME, we’re sure you’ll take the money anyway, but only for those you know you’ll keep on, otherwise, you’d need to pay it back. Think about that for a minute. Or, maybe, you’ll keep them on, just until February, although that may be a tall order for only £1000.

Apprenticeship incentive

Getting a bonus for employing an apprentice isn’t new, and the availability of an increased number of new places is good news. The Kickstart scheme takes it one step further, though. Offering employers up to £2000 to create a new apprenticeship position is a step up and could be worthwhile for those businesses that have the staff to work with, help train and mentor new starters like this. It’s to something to take lightly.

Also, you should read up on the legal rights of apprentices. Employing an apprentice isn’t the same as hiring a regular employee; there are protections in place that make it very difficult to let an apprentice go if the business gets into trouble. However, as several of our clients have found, good apprentices are worth a lot and can become highly valued full-time employees at the end of their apprenticeship. Plus of course, the government pays for their education and training and is now paying you £2000 (or £1500 for those over 25).

Kickstart scheme

This scheme is for those between the ages of 16 and 24 ‘on Universal Credit and at the risk of long-term unemployment’. The idea is that the placements are for work experience, not actual jobs, and will end after six months. It’s a good idea (similar to Labour’s scheme in 2009, the one that David Cameron scuttled once PM), as many younger people are struggling to get the work experience and necessary confidence they need if they are going to get a full-time job.

The government will pay 100% of the national minimum wage for 25 hours a week. It’s up to employers if they want to top this up.

One concern is that the scheme is open to abuse and nobody seems to know how it will be policed. More unscrupulous employers could use it as a way to get cheap Labour. It could also lead to those 25 to 26 years olds who may have presented better potential, loosing out.

The other question that comes to the fore is that these positions need the utmost supervision, as they are work experience positions. So, somebody has to be doing the actual work to be experienced – which as we have seen, presents its own set of problems.

Still, as the unions commented, “It’s a good first step”.

Final thoughts

The measures presented don’t have all the answers, but then what does in such challenging and rapidly changing times. The critical thing is, something is being done.

We hope that there’s something in there that works for some companies and employees. It does, however, leave those with established experience, families and mortgages, exposed. There is more incentive to hire younger people, in their 20’s than those in their 30’s and 40’s, who, because of their existing commitments, probably need more help than the younger ones who are probably still living at home. Maybe the parents (who have their own employment problems) can see the bright side, and let the kids become the breadwinners for a while – now that’s real work experience!

 

This post is intended to provide information of general interest about current business/ accounting issues. It should not replace professional advice tailored to your specific circumstances.