Thursday, August 13, 2020

Chancellor’s Economic Statement provides food for thought or more thought of food?

James Pinchbeck, Marketing Partner at Streets Chartered Accountants, breaks down the Chancellor’s economic statement and what it means for businesses.

The headline grabbing announcement from the Chancellor’s economic statement yesterday has to be the innovative approach to supporting the hard-hit hospitality and leisure industry with the introduction of eat out to help out.

This scheme will run throughout August every Monday to Wednesday providing diners with a discount of up to £10 per person when dining out. Whilst overall consumer spending has declined, the exception during lockdown has been on food and drink.

Mindful that he needs to get consumers spending more, it seems the Chancellor has introduced the scheme to play a part in boosting consumer spending and supporting a hard-hit sector.

Against a background of a 25% decline in economic growth in just two months of lockdown, a decline which mirrors a period of economic growth over a 10 year period, and some 9 million workers furloughed with the threat of unemployment rising to rates not experienced for many a year, the Chancellor’s focus was on protecting, supporting and creating jobs.

The key measures announced include the introduction of the Job Retention Bonus scheme, which will give employers a £1,000 per employee bonus for those returned from furlough to work and that remain in post until January 2021.

Support for those looking to enter the workplace was also provided through the introduction of the Kickstart scheme for those aged 16-24 along with financial incentives for employers to take on trainees and apprentices. Hopefully many an employer and potential employees will be able to benefit from such schemes.

The challenge perhaps is more about whether businesses are able to support such roles or have the demand for additional workers, or even if roles exist as they have responded to lockdown with changes to the business model and working practices.

The hospitality and leisure industry, as mentioned already, will welcome the eat out to help out scheme. They will also welcome the reduction in the rate of VAT charged from 20% to 5% specifically for those operating in the sector.

Looking to the property sector, the Chancellor was keen to get house sales moving again, following a period of stagnation in lockdown. The move to remove stamp duty from house sales up the value of £500,000 must be a step in the right direction.

With a growing trend to a focus on three by the Government, the Chancellor outlined more measures to build, build, build a better and greener recovery. This included the introduction of the green homes grant with £2bn allocated to greener homes.

Whilst the measures announced will undoubtedly play a key and significant role in the economic bounce back, it will also require consumer spending to start to return to levels pre-lockdown. The big question here then is how do the measures help to improve consumer confidence and subsequently spending?

Many are still rightly very concerned about financial security and COVID security frustrated supply chains leading to low stock levels is also having an impact on overall consumption.

Could the Chancellor have done more? Perhaps there could have been more in terms of support around upskilling the workforce especially around the use of digital technologies.

Many businesses have been forced to change and adapt and as such support in terms of guidance, advice even financial assistance to look at new working practices, improving productivity and developing new markets would no doubt be welcome as we move to a new order of business re-imagined.

For our school children and students about to embark upon a long summer holiday, perhaps consideration should have been given to the need to invest in technology to expand and enhance the delivery of education in response to the new norm for remote and blended learning.

Certainly, it is unlikely that students will be returning to school, college or university in September to learn in the way they did pre lockdown. The necessity to study remotely and therefore using technology is likely to be a lasting move to a more mixed delivery of education and one which if invested in will equip and prepare learners better for the workplace of tomorrow.

The Government’s focus rightly so has been on safeguarding individuals lives and livelihoods.  However, as we look to the later part of the year and Chancellor’s Autumn Budget thoughts turn to the measures that might need to be introduced to re-balance the books.

It is anticipated that the focus will be on making changes to capital taxes to raise much needed revenue. Looking forward to Spring, there seems to be a perfect storm brewing as the measures such as the VAT deferral scheme come to an end, with payments due, the introduction of changes to IR35 and Domestic Reverse Charge on VAT for those in the construction industry.

The days and months ahead will no doubt see many a business owner taking the time to review and plan for the longer term. Perhaps taking advantage of the eat out to help out initiative might provide the time to reflect and consider the situation.

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