Summer Economic Update: The Highlights

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On 8 July Chancellor Rishi Sunak delivered a Summer Economic Update, which outlined measures designed to boost the UK economy following the coronavirus (COVID-19) lockdown. These measures follow the £160bn provided by the Government at the start of the crisis to cushion the economic fallout from the Covid-19 crisis and lockdown.

A new Job Retention Bonus was announced, which will provide employers with a one-off £1,000 bonus for each furloughed employee who is still employed as of 31 January 2021. It is hoped that this  Job Retention Bonus will incentivise firms to retain furloughed workers rather than making redundancies. The current Jobs Retention Scheme, which has to date paid 80% of furloughed staff’s wages, will wind down flexibly and gradually until the end of October.

VAT will be reduced from 20% to 5% for the next six months for businesses in the hospitality and tourism sector – few would disagree that this has been one of the hardest hit sectors as a result of Covid-19, and hence merits this £4bn government catalyst. The VAT reduction will take effect from 15 July, and will apply to eat-in or hot takeaway food from restaurants, accommodation, cinemas, theme parks and zoos. Meanwhile, a new Eat Out to Help Out discount scheme will provide a 50% reduction for sit-down meals in cafes, restaurants and pubs across the UK from Monday to Wednesday every week throughout August 2020 up to a maximum discount of £10 per head for everyone, including children.

Sunak also announced the new “kickstart” job creation scheme for young people via which the government will pay the wages of new young employees for six months. There will be an initial £2bn to fund hundreds of thousands of jobs but no cap on the number of places available. This, coupled with a new Apprenticeship bonus of up to £2000 per apprentice from August 2020 to Jan 2021, is intended to assist young people into work and help businesses to help fire up the economy.

The environment is set to benefit, with £1bn allocated to make public buildings greener plus vouchers worth £5,000 (and up to £10,000 for poorer families) to be made available out of a £2bn pot to retrofit homes with insulation, helping to cut carbon emissions.

And finally, the Chancellor also announced a temporary increase to the nil-rate band of residential Stamp Duty Land Tax (SDLT) from £125,000 to £500,000 until 31 March 2021 to invigorate the housing market – this takes effect immediately and will be in place until 31 March 2021 (Please note this only applies in England and Northern Ireland at time of writing)

Announcing these measures, the Chancellor said: ‘Our plan has a clear goal: to protect, support and create jobs. It will give businesses the confidence to retain and hire. To create jobs in every part of our country. To give young people a better start. To give people everywhere the opportunity of a fresh start” 

If you run a business and are keen to understand how these measures might affect you, please contact us.