Billions in loans, scrapping of rates – the chancellor’s help for businesses | Business

The chancellor has outlined an unprecedented government intervention to support the British economy through the worst of the coronavirus outbreak. Taken together, the emergency steps announced by Rishi Sunak are worth at least £330bn in state loan guarantees and £20bn in fresh tax reliefs and grants.

Loan guarantees

The government will make available £330bn of loans backed by the state to support businesses. The chancellor described the lending firepower as unprecedented, as well as only an “initial” step that could be expanded if required. “I said whatever it takes, and I meant it,” he added.

The idea behind the loans is to support businesses that need urgent access to cash, such as to pay landlords and suppliers.

It will be delivered through two main schemes. For the largest firms in Britain, the Bank of England will act to buy up their outstanding bonds to provide an immediate cash windfall if necessary. Only firms able to demonstrate they were in sound financial heath before the virus struck will be eligible, while the terms will be comparable to what the firms could have received in the commercial bond markets prior to the crisis.

For smaller firms, the chancellor said he would expand the business interruption loan scheme – a plan announced at last week’s budget that will be delivered by the British Business Bank, the state-backed lender – to offer firms up to £5m of loans with no interest due for the first six months, up from a previous proposal of just £1.2m.

Economists said the loan guarantees should prevent the triggering of a financial crisis, minimising the chances that the unfolding economic crisis does lasting damage to the British economy. Both of the measures – for small and large firms – will be available from next week.

Business rates

The taxes levied on commercial premises will be abolished this year for all retailers, leisure outlets and hospitality sector firms, in a dramatic escalation of a relief package announced at last week’s budget.

Sunak had originally planned for the rates holiday to apply only to small firms in the sector, although the rapidly escalating crisis has forced him to expand the support to all companies in the industry. Even before the change, the plan would have covered almost half of all business premises in England. Now it will go much further.

The measures are designed to protect some of Britain’s biggest employers, with at least 6m jobs across the retail and hospitality industries, after Boris Johnson advised the public to stay away from pubs, theatres and restaurants on Monday.

Cash grants

In an additional step to support retailers, leisure businesses and hospitality firms, small companies occupying business premises with a rateable value of between £15,000 and £51,000 will be eligible for grants worth £25,000.

Britain’s smallest 700,000 businesses – across all sectors of the economy – will also be eligible for cash grants of £10,000.

Retail groups said the steps represented a “vital shot in the arm” for a sector facing enormous uncertainty. Helen Dickinson, chief executive of the British Retail Consortium, said: “We still need to see the details and make sure that retailers can access cash with the minimum of delay, but it is a welcome and necessary first step to protect jobs.”

Mortgage holidays

Britain’s biggest mortgage lenders have agreed to support customers struggling to repay their home loans as a result of the coronavirus, with payment holidays of up to three months. The government said this was to give people time to recover from the virus. Sunak added that the housing secretary will soon be making a statement to “protect renters in these difficult times”.

Other steps

Support for the food industry will be provided by relaxing regulations to allow pubs and restaurants to start providing takeaways without securing planning approval, while the chancellor also confirmed that the government’s advice that the public should stay away from pubs, clubs and theatres is sufficient for companies to claim on their insurance if they had a pandemic clause.

In a hint of further steps to come, Sunak also said the government was in talks with trade unions and business groups to develop “new forms of employment support to help protect people, jobs and incomes”. The suggestion from his statement could be that sick pay or benefits could be made more generous.

The tone of Sunak’s announcement will be viewed as key, as the chancellor echoed Mario Draghi, the former governor of the European Central Bank, who is credited as saving the eurozone with a speech in 2012 to say he would do “whatever it takes” to protect the economy. Promising more financial help in future could help to further shore up confidence in Britain.

What other major economies have done

France: President Emmanuel Macron has promised: “No company, of any size, will be allowed to go bankrupt.” The French stimulus package, unveiled on Monday, is worth £41bn. It will pay workers temporarily laid off by crisis-hit businesses, and some social charges and taxes are suspended. There’s also £272bn of French state guarantees for bank loans to businesses. He also said the government could buy major companies to rescue them – with Air France likely to be the first candidate.

Germany: Angela Merkel’s centre-left coalition has made £450bn in loans available to companies. They will be available to all companies, big and small, and allow companies to defer “billions of euros” in tax payments. Merkel also resurrected a compensation scheme used in the financial crisis that compensates workers sent home by their employers. Berlin has also agreed to increase public investment by £11.2bn by 2024. The state of Bavaria has launched a £10bn fund to buy stakes in struggling companies.

US: Donald Trump said he would put together an additional $850bn rescue for companies and staff, including $500bn in tax cuts and direct $1,000-a-head payments to Americans. There is also $200bn to $300bn in small business relief and $50bn-$100bn for the airlines. The treasury secretary, Steve Mnuchin, wants Congress to endorse deferrals on tax payments of up to $1m for individuals, or $10m for companies.

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