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SBT Finance
from SBT issue 440
SBT FINANCE SPONSORED BY:
THE WINTER ECONOMY PLAN
BY WATSON ASSOCIATES
MHA CONSTRUCTION SECTOR REPORT
BY ROBERT DOWLING, HEAD OF CONSTRUCTION & REAL ESTATE
The Winter Economy Plan
The Chancellor announced yesterday new measures in a Winter Economy Plan that sets out how the government intends to protect jobs and continue to support the economy over the coming months.
The new plan was released instead of
Finance the normal Autumn Budget that was officially cancelled on the 23 September.
Further support for employment
The Chancellor confirmed that as previously advised the Coronavirus Job Retention Scheme would finish at the end of October stating that it was necessary to focus the efforts on supporting “viable” businesses and jobs. The launch of the new Job Support Scheme was announced as a replacement. The Scheme will commence from 1 November and will run for 6 months. The key information is set out here: • Support viable jobs • Employees must work at least a third of their contracted working hours and employers will continue to pay the wages for staff for the hours they work. • For the remaining contracted hours not worked, the Government and the employer will pay a third of the shortfall in the employee’s usual pay. The
Government’s contribution is capped
at £697.92 per month. This means those working only 33% of their usual hours will still receive 77% of their salary. 55% covered by the employer and 22% by the Government. • The new Job Support Scheme is open to all small and medium-sized businesses, as well as larger firms who must demonstrate they have been adversely affected. Even small firms that did not need to use the original furlough scheme can potentially utilise the Job Support Scheme. • Employers also able to claim the Job
Retention Bonus simultaneously
• The Job Support Scheme is designed to work in tandem with the Jobs
Retention Bonus. The Job Retention
Bonus was announced in July confirming that the government will pay a one-off payment of £1,000 to
UK employers for every furloughed employee who remains continuously employed through to the end of
January 2021. Employers will need to have maintained enrolment for
PAYE online, a UK bank account and ensured that the eligibility criteria have been met. • Businesses will not be able to issue redundancy notices to employees on the Job Support Scheme.
Self-employment income support scheme extension
• Self-employed individuals have also been given additional reassurances of Government aid between now and 30th April 2021. The Self-Employed
Income Support Scheme (SEISS) will now provide 20% of an individual’s average monthly trading profits in the form of a cash grant. This is significantly lower than the first and second SEISS grants of 80% and 70% respectively. • The third grant will cover November through to January, spanning three months of average monthly trading profits in one instalment – up to a maximum of £1,875 in total. • An additional fourth grant, which may be adjusted to respond to changing circumstances, will be available for self-employed individuals to cover the period from February 2021 to the end of April.
Deferrals and tax cuts
An array of deferrals and tax cuts were also announced to help businesses with cashflow.
Tourism and hospitality sector
• There is to be an extension to the temporary 15% VAT cut for the tourism and hospitality sectors to the end of March next year.
Deferral of VAT payments
• All businesses who deferred their
VAT bills between March and
June this year can utilise the New
Payment Scheme, which gives them the option to spread the VAT liability.
Businesses will need to “opt-in” to take advantage of the scheme,
HMRC will launch the “opt-in” process in early 2021. • Rather than paying a lump sum in full at the end of March 2021, it will be possible to make 11 smaller interest-free payments in the 2021-22 financial year.
Deferral of self-assessment tax payments
• Self-assessment taxpayers will be able to benefit from an additional 12-month extension from HMRC on an
Enhanced Time to Pay arrangement.
As a result payments on account for
July 2020, and those due in January 2021, will now not need to be paid until January 2022. • Where the total tax due doesn’t exceed £30,000 the application for time to pay will be agreed automatically when the taxpayer applies using an online form.
Changes to finance schemes
The government is extending the four temporary loan schemes, which have helped over a million businesses to date, to 30 November 2020 for new applications and 31 December set as the new deadline for approvals. This includes the Bounce Back Loan Scheme (BBLS), Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS) and Future Fund.
Pay as you grow
• The government will give all businesses that borrowed under
the BBLS the option to repay their loan over a period of up to ten years instead of six. This will reduce their average monthly repayments on the loan by almost 50%. • UK businesses will also have the option to move temporarily to interest-only payments for periods of up to six months (an option which they can use up to three times), or to pause their repayments entirely for up to six months (an option they can use once and only after having made six payments). • These changes will provide greater flexibility to repay these loans over a longer period and in a way that better suits businesses’ individual circumstances.
CBILS loan extension
• The government intends to allow
CBILS lenders to extend the term of a loan up to ten years, providing additional flexibility for UK-based
SMEs who may otherwise be unable to repay their loans.
We hope this information helps and supports you and your business, and we’ll continue to keep you updated on key developments over the coming weeks.
Further reading
In addition please see enclosed link for additional information and help:
1. https://www.gov.uk/government/
news/coronavirus-covid-19- guidance-for-employeesemployers-and-businesses
2. https://www.gov.uk/government/
news/chancellor-outlines-wintereconomy-plan
For further information or advice, get in touch with us at www.watsons.co.uk
MHA Construction Sector Report
The term unprecedented may be overused, but the global response to COVID-19 has been unlike anything we have seen in recent times. And the impact on the UK construction industry has been no different.
This summer, the MHA Construction
Finance team interviewed 100 clients from across the UK to discover how they’re coping not only with COVID, but other key areas including funding, recruitment and technology.
The Spring Budget in March 2020, delivered by newly appointed Chancellor Rishi Sunak, was just the start of government support for businesses. The strict national lockdown followed shortly thereafter, the effects of which we are still feeling today and no doubt we will continue to feel for some time to come. The recently delivered Winter Economy Plan offered some further support, but whether it will be enough is yet to be seen.
Some construction companies are reporting their busiest ever periods and yet many have seen huge threats to their business models, their customers and their very existence. The results of the Report show a stark divide in today’s construction sector, between those who were able to capitalise on the opportunities presented and those who struggled to finance their way through lockdown. Will the Government’s ambitious infrastructure plans be enough?
Key highlights
Strong start to the year
The industry entered 2020 with strong balance sheets, increased turnover (8.3%) and low debt risk. The largest businesses saw the greatest increase in revenue from the previous year.
COVID-19 divide
The industry is evenly split between businesses with a substantial or critical impact due to COVID-19 (54%), and those with little to no impact (46%).
Build, build, build
The Government’s plans to ‘build, build, build’ is encouraging for civil infrastructure projects. More than half of respondents said infrastructure spending should be the Government’s top priority for the sector.
Employment support
Furlough is the word of the year for 2020, with more than 80% of construction businesses taking advantage of the Coronavirus Job Retention Scheme, and a further 70% of those retaining all staff.
The future looks green
Nearly two-thirds of respondents are either planning or considering implementing green technology in the next 12 months.
What happens next?
Nearly 4 out of 5 respondents said the single biggest factor holding back growth was economic volatility. With the wind down of Government support,
and Brexit on the horizon, uncertainty is holding the industry back.
COVID-19
The impact of COVID-19 upon the sector was particularly untimely. Only months before, the government had announced notice of significant infrastructure investments. The sector was primed for a sweet spot of both private and public led contracts to assuage concerns over the potential impact of Brexit.
Respondents to our survey highlighted the split between business which have fared well through COVID-19, and those which have suffered, with 44% citing this as ‘minimal’ compared to 49% who see a ‘substantial’ impact.
The short term legacy of COVID-19 is generating a background of reduced productivity, increased operating costs, intensified contractual wrangling and deferred contract payments, all undoubtedly causing greater risk in sector operations and forcing management to be both diligent and agile in all areas. A greater concern however may be future planning in dealing with a wider chasm of the unknown; namely orderbook deferral, future contract terms and the going concern status of main contractors.
So, we come full circle to government promises. It appears critical they are swiftly delivered, engendering confidence within the sector and across all regions, to ‘level up’ the sector’s COVID-19 recovery.
Looking forward
The COVID-19 pandemic has had a significant effect on all economic activity in the UK and across the world. With the construction sector being a traditional bellwether for the economic cycle in general, the results of our recent survey are all the more insightful.
Less than a third of our respondents indicated that there would be any significant capital investment in their businesses within the next 12 months, with a further 20% unsure. With nearly 60% of respondents expecting no revenue growth within 12 months and 60% of businesses not expecting profitability to return to preCOVID-19 levels for at least 6 months, it’s no surprise that investment decisions are being postponed.
In fact, the single biggest factor holding back growth was economic volatility, with 76% of respondents saying this was the largest factor. This has a massive knock on-effect for the sector as other factors are tangentially affected by this uncertainty – labour supply, material and supply chain security, and of course the financial security of funding lines.
Find out more
To find out more, download the full MHA Construction Sector Report. The Report looks at the state of the construction sector going into the COVID pandemic, analyses how the sector is responding to current challenges, and anticipates the way forward for the industry.
