Business Review March 2020

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BUSINESS REVIEW Spotlight on issues affecting business

BUDGET TO PROTECT BUSINESSES BREXIT SUPPORT GRANTS UNVEILED COVID CREATES PAY CHALLENGE WORK TENSIONS: DIVIDED TOGETHER HEALTH AND WELLBEING STRATEGIES OTHER NEWS

MARCH 2021

BUSINESS REVIEW

BUDGET TO PROTECT BUSINESSES

BREXIT SUPPORT GRANTS UNVEILED

COVID CREATES PAY CHALLENGE

Chancellor Rishi Sunak has delivered his second Budget, in which he unveiled a three-part plan to support businesses through the pandemic, “fix” the public finances and lay foundations for the future economy.

HMRC has announced details of a £20m fund to help small and medium-sized businesses adjust to post-Brexit trading arrangements with the EU.

Data from the latest reward management survey conducted by the Chartered Institute of Personnel and Development (CIPD), has shone a light on the impact COVID-19 is having on reward practices in the UK.

Mr Sunak again pledged to continue doing “whatever it takes” to help business through “this moment of crisis” as he announced a raft of coronavirus business support measures (see back page for details). The Chancellor also announced a number of policies relating to taxation as part of his plans “to begin the work of fixing our public finances.”

These included a freeze in the tax-free personal allowance and higher rate Income Tax threshold from April 2021 until 2026. In addition, the Chancellor announced the main rate of Corporation Tax will rise to 25% in April 2023, although businesses with profits of £50,000 or less will continue being taxed at 19%.

During his speech, Mr Sunak also revealed the latest economic forecasts produced by the Office for Budget Responsibility which predict “a swifter and more sustained recovery” than previously expected. According to the updated figures, the UK economy is now forecast to grow by 4% this year and by 7.3% in 2022.

The SME Brexit Support Fund will provide financial assistance to small firms who trade only with the EU and require practical advice to prepare for new import controls coming into force in April and July. Firms established in the UK for at least 12 months, with no more than 500 employees and an annual turnover of up to £100 million will be eligible for the grants worth up to £2,000.

Firms have reported a range of problems relating to new arrangements introduced since ratification of the UK-EU Trade and Cooperation Agreement. A British Chambers of Commerce (BCC) survey conducted between 18–31 January, for instance, found that around half of UK exporters faced difficulties trading goods with the EU. Commenting on the new grants, the BCC’s Head of Economics Suren Thiru said, “This is a welcome first step in dealing with some of the major issues that small businesses trading with the EU are facing.

With their finances already under a significant squeeze, firms, particularly those which export, are inevitably encountering difficulties in adapting to the complexities of the new arrangements.”

The research took place in October 2020, with 420 reward professionals from the private, public and voluntary sectors responding on behalf of their employers. Perhaps unsurprisingly, the findings show the pandemic has generally had a detrimental impact on employers’ finances, with 80% of respondents reporting a negative effect while only 9% said it had improved things financially and 11% felt it had no effect.

In turn, the financial impact felt by employers during the pandemic largely determined the nature of pay awards handed out during 2020. For instance, while only 19% of employers who reported a ‘very negative’ financial impact said they gave all their staff a pay rise, 50% of the ‘very positive’ group did likewise.

Comparing last year’s decisions with predictions for 2021, the research suggests pay awards will be more targeted this year rather than being applied across the whole workforce. Indeed, the percentage of employers expecting to award pay rises only to some employees is predicted to jump from 29% in 2020, to 53% in 2021.

For the latest information on COVID-19 and the measures the government are taking visit the government website.

BUSINESS REVIEW

OTHER

NEWS NEW VAT DEFERRAL SCHEME

QUIRKY QUOTE: “Anyone who lives within their means suffers from a lack of imagination.”

— Oscar Wilde

WORK TENSIONS: DIVIDED TOGETHER

HEALTH AND WELLBEING STRATEGIES

New research has highlighted a range of tensions between work colleagues that could create challenges for employers as people return to the workplace.

Despite the growing prominence of health and wellbeing issues at work, a study has found that employer initiatives in this area typically lack strategic focus.

A 1,500-person study undertaken by Westfield Health sought to ascertain how COVID-19 has reshaped people’s attitudes and expectations of work. The findings, documented in the report Divided Together, reveal a complex patchwork of emotions that vary depending on people’s personal experiences of the pandemic.

In particular, a degree of mistrust was uncovered between furloughed employees, people working from home and those going into work. For instance, 35% of homeworkers felt furloughed colleagues had less to worry about, even though 56% of furloughed workers actually reported heightened anxiety feelings.

The study also found that 51% of homeworkers believe colleagues are doing less than they say, while 46% think parents use their children as an excuse to do less work.

A sense of the ‘grass being greener’ was also unearthed, with 38% of those going into work and 36% of those working from home wishing they were doing the opposite.

Looking forward, businesses will clearly need to be sensitive to different employee experiences during the pandemic and focus on bridging any workplace divides in order to ensure a harmonious and productive workforce.

According to Aon’s UK Benefits & Trends Survey 2021, 56% of employers plan to have board-level sponsorship for health and wellbeing initiatives, highlighting the significance many firms now attach to such issues. However, the research also found that only 44% actually had an employee wellbeing strategy in place.

In addition, the study suggests employers may be focusing too heavily on emotional and mental health while ignoring other pillars of wellbeing (physical, financial, career and social). Indeed, although 76% of employers had developed an emotional and mental wellbeing strategy, just 32% had a career strategy and only 30% a social wellbeing programme.

Commenting on the findings, Aon’s Head of Health & Risk Consulting Mark Witte said, “The fact that less than half of the employers we surveyed have a comprehensive wellbeing strategy in place is perhaps one of the key observations from this year’s survey.

There is no shortage of investment in health and benefits generally, nor is there a lack of focus on specific support; however, overall, wellbeing activity all too often lacks strategic focus.”

HMRC has announced details of a new scheme that allows businesses who deferred their VAT payments between March and June 2020 to repay the money owed in up to 11 equal consecutive monthly instalments. Businesses need to opt-in to the VAT Deferral New Payment Scheme which opened online on 23 February and closes on 21 June. Over half a million businesses deferred their VAT payments last year.

RECURRING CONDITIONS TAKE THEIR TOLL A survey of 2,300 full-time workers conducted by pain-relief firm Biofreeze, found the second most common reason for sickness absence in the UK is recurring medical conditions such as a chronic pain condition. The research suggests the average employee with a recurring medical condition takes 17 days of sick leave per year and, in 2020, all of those absences collectively accounted for nearly a quarter of total sick days taken.

PANDEMIC DRIVES ENTREPRENEURIAL SPIRIT Last year around 835,000 new businesses were registered in the UK, according to data collated by Reboot SEO Agency, a 41% increase compared to the number of registrations during the previous year. This sharp rise was primarily driven by a significant drop in job vacancies due to the pandemic which has encouraged increasing numbers of people to launch their own businesses.

MARCH 2021

THE BUDGET 2021 Key business support measures either announced or confirmed during the Chancellor’s Budget speech on 3 March include:

• Furlough scheme extension to end of September with businesses asked for 10% contribution in July, rising to 20% in August and September

• Self-Employment Income Support Scheme to pay fourth and fifth grants, with a further 600,000 self-employed potentially eligible

• Business rates ‘holiday’ in England extended to end of June with further discount available over rest of this year

• 5% reduced rate of VAT for tourism and hospitality sectors extended to end of September with interim rate of 12.5% for further six months

• Restart Grant Scheme to provide grants of up to £18,000 for high street businesses

• Cash incentives for firms taking on an apprentice rising to £3,000

• New Recovery Loan Scheme offering 80% government guarantee on SME loans of £25,000 to £10m.

BUSINESS REACTION

COVID fraud taskforce established The Chancellor also used his Budget speech to announce details of a new HMRC taskforce designed to combat coronavirus-related fraud.

Mr Sunak said £100m had been allocated to establish the Taxpayer Protection Taskforce which will aim to crack down on criminals who fraudulently claim money from COVID-19 financial support schemes. The taskforce will be staffed by more than 1,000 HMRC investigators.

Elite visas to be introduced Another announcement Mr Sunak made during his Budget speech relates to the introduction of an elite points-based visa system designed to attract highly-skilled migrant workers.

The Chancellor said the aim was to “attract the best and most promising international talent in science, research and tech”. The new scheme, which is due to be introduced by March 2022, will allow people with a job offer from a recognised UK scale-up to apply for a fast-track visa.

Tony Danker, Director General of the Confederation of British Industry

“The Chancellor has gone above and beyond to protect UK businesses and people’s livelihoods through the crisis. Thousands of firms will be relieved to receive support to finish the job and get through the coming months.

The Budget also has a clear eye to the future; to ensure finances are sustainable, while building confidence and investment in a lasting recovery.”

“This Budget delivers a solid platform for many businesses to relaunch as the economy reopens.

The Chancellor’s efforts to combine life support for the economy with measures to turbocharge growth is the right call.”

Jonathan Geldart, Director General of the Institute of Directors

“There’s much to welcome in this Budget for business communities across the UK. Extensions to furlough, business rates relief and VAT reductions give firms a fighting chance not only to restart, but also to rebuild.”

Adam Marshall, Director General of the British Chambers of Commerce

All details are correct at the time of writing (11 March 2021) Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored advice and is for information purposes only.

Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on individual circumstances. No part of this document may be reproduced in any manner without prior permission.

BUSINESS REVIEW

MARCH 2021