Accountants share their hopes – and concerns – following the Government’s lockdown exit plan announcement.
Prime Minister Boris Johnson last week set out his ‘irreversible’ roadmap out of lockdown, which involves a cautious four-step approach to lifting restrictions, with several weeks between each stage. Progression to subsequent stages can only happen if the four key tests are met:
- Successful roll-out of vaccination programme across the country.
- Vaccinations continue to reduce hospitalisations and deaths.
- Infection rates remain stable and/or low.
- No new variant has emerged.
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The first stage, the re-opening of schools, is due to start on 8 March, followed by further easing on 29 March (still stage one), which will end the ‘stay at home’ rule. From this date, up to six people will be allowed to meet outside or in private gardens (the rule of six), outdoor sports facilities will be allowed to open, and weddings with up to six guests can commence.
Roadmap key dates for businesses include:
- 12 April (stage two): The following businesses can re-open: all shops, hairdressers and beauty salons, gyms, libraries, indoor and communities centres, along with zoos and theme parks. Weddings with up to 15 guests can commence.
- 17 May (stage three): Pubs, restaurants and other hospitality businesses can open indoors, along with hotels and B&Bs, museums, theatres and cinemas. Live events and performances will still have a limit on the numbers of attendees.
- 21 June (stage four): Nightclubs can re-open. All other social restrictions will be lifted from this date.
While this exit plan has been broadly welcomed, there has, to date, been a distinct lack of detail.
The Coronavirus Job Retention Scheme was due to expire in April, but Chancellor Rishi Sunak is widely expected to extend it until later in the Summer.
We asked accountants what this roadmap will mean for their clients and what business support packages they’d like to continue or be extended.
Businesses are rejuvenated but remaining cautious with plans
Claire Bartlett, director at Arden Bookkeeping
There is great excitement from all businesses that the end is nigh, and they will be able to begin trading as normal once again. A lot of my clients have had to find new and alternative ways to generate sales revenue through lockdown, often involving social media and live videos. Most are keen to continue this after lockdown, which I think is great.
The furlough scheme has by far been the most beneficial scheme to all our clients and one that is still very heavily depended on. There is, however, some trepidation not to get hopes up just yet, as things can change dramatically, as we have seen before. But definitely, they are cautiously planning for the next stage in their business.
Next Steps: Now is a good time for businesses to re-evaluate their business model and think about the future.
Verdict: Businesses have felt rejuvenated by the roadmap out of lockdown and are starting to plan the next stage.
Roadmap brings clarity and optimism to clients, but continued government support deemed essential
Matthew Thorpe, Managing Partner of Haines Watts, Hornchurch
Businesses have been crying out for clarity for many months. Now, this roadmap brings that clarity. However, the biggest concern for me is the risk of releasing too soon and having to back-peddle. Business owners have shown super-human resilience and flexibility to get through the last ten months. It would be devastating to see them fall at the final hurdle because they have made plans and taken costs on with a view to opening and trading as normal, only to be closed again.
Many clients have experienced huge cash flow problems, so they will need to build momentum quickly to survive. Engaging staff, opening premises and taking the cost that goes with it on too soon could be detrimental.
There is also a wider concern over how the landscape will look. Will commercial landlords see companies continue to reduce office space? Has the high street changed irreversibly? Will people have the same disposable income to spend on leisure and hospitality? Nobody knows for sure, but it seems highly likely that many areas of our economy will be changed forever.
Next steps: It’s easy to get swept up in the excitement of re-opening, but the road to recovery is sure to go through peaks and troughs. So have a flexible approach, set clear spending limits and ensure monitoring is robust. Set clear expectations and trigger points, then stick to them.
Verdict: The roadmap brings clarity, but there are concerns that restriction lifting may be temporary and detrimental to businesses.
There are signs of fresh optimism
Lee Meredith, Associate Partner at Haines Watts, West Midlands
Generally, there is a new-found sense of optimism among our clients. Many have been under severe pressure whilst coping with the lockdown restrictions – this roadmap changes all that.
But businesses are still wary that this roadmap is far from certain. Mutations to the virus, issues with the vaccination programme, and many other variables could all derail or affect the planned re-opening.
Until now, the furlough scheme has been beneficial, not only preserving jobs, but actual businesses. It’s helped retain employees and helped businesses remain a going concern. CBILS and bounce back loans have also played a key part in managing cash flow.
So what business needs now is for this support to continue until we, as a country, are free from the effects of the pandemic. If assistance is shut off too soon or at too severe a rate, the economy could still falter. Many businesses are at a knife-edge and, until lockdown restrictions are fully lifted, will not be able to be self-sustaining. It will take a lot of companies months, if not years, to get back to the position they were in before Covid-19.
Next steps: Our job as accountants has meant going beyond the traditional compliance function and using our skills as business advisors to help with business plans and to assess cash flow projections and forecasts critically. It’s about being on hand to give clients comfort that they have a trusted advisor alongside them.
Verdict: The roadmap has given optimism, but business support must not be cut off too soon as many companies are still on a knife-edge.
Food and drink businesses are nervous around potential ‘bumps in the road’ out of lockdown
Phil Mills, Head of Food & Drink, Old Mill
Many businesses have had an extremely changing twelve months, and getting it right in the recovery phase will be critical.
Some of our clients in the hospitality and food and drink sectors have been affected by the re-opening and then closing of the economy, which has caused them huge headaches when trying to plan in terms of managing stock levels, spoilage, etcetera.
There’s a level of nervousness as the uncertainty means that it’s trickier for them to navigate this next phase. The big risk is that nothing is set in stone. Businesses are concerned about potential ‘bumps’ along the road impacting cash flow and their ability to trade.
Cash reserves are running very low, so it’s crucial that the government doesn’t abandon them. With unemployment rising to its highest level since 2016, the prospect of redundancy is still a real threat for many workers. The Chancellor has a delicate balancing act to perform to keep these firms going.
With loan guarantees, the business rates holiday, the furlough scheme and the reduced VAT rate for hospitality businesses all coming to an end, there are huge levels of interest in what Mr Sunak will do to support beleaguered business owners.
Next steps: We’ve been encouraging clients to embrace digital platforms wherever possible, as it has made a real difference for us as advisers in interpreting what’s happening in the business on a day-to-day basis and guide them accordingly.
Verdict: Nervousness among food and drink clients who have struggled with cash flow and stock spoilage, so more business support is needed.
The roadmap is a ‘moving target’ and lacks detail
Chris Tate, business advisory director, Moore South Accountants
The roadmap is somewhat helpful in indicating timings. However, it lacks detail as to the specific restrictions on businesses that will continue to apply. Therefore it is difficult for businesses to plan. It is also contingent on several variables and therefore remains a moving target.
In terms of business support, many, but not all, of the Government support measures are non-sector specific. As a result, some sectors are receiving support that arguably they don’t need, while those hardest hit are not receiving enough support.
Next steps: The government need to begin weaning off general support measures and focus on sector-specific support packages for those sectors which continue to be impacted by ongoing restrictions.
Verdict: Roadmap remains a moving target due to several variables, and support available doesn’t go far enough to help those sectors which are struggling more than most.
Restriction easing can’t come soon enough, but support measures desperately needed
Rob Wardle, head of tax, Azets in the North West
SMEs are the backbone of the UK economy, and for a significant number, the current situation has become business-critical. The re-opening of the economy can’t come soon enough.
A perfect storm is looming in the next few months when furlough comes to an end, and banks start demanding repayment of loans deferred under the repayment holiday scheme. Banks will also look to recover CBIL and BBLs loans arranged last year. Time and cash are key to prevent a large number of distressed businesses from closing.
The economy needs the Chancellor to go further with support measures, and the most effective way is to ease business taxes.
Azets has outlined some essential measures that would help provide SMEs survive into 2022 and beyond:
- Extend the 5% VAT hospitality rate beyond March 2021
- Extend the business rates holiday beyond 2021
- Encourage recruitment by reducing employers NIC (currently 13.8%) for the first year
- Support youth recruitment a further reduction in employers NIC
- Support start-ups with a 10% Corporation Tax on turnover up to £500,000
- Encourage investment by doubling the annual investment allowance to £2m
- Encourage investment in technology with 200% capital allowances on eligible items up to £1m
- Help for the self-employed who did not qualify for SEISS
- Extend the current stamp duty holiday
- Support entrepreneurship by maintaining lifetime capital gains relief at £1m
Next steps: We’re urging businesses not to bury their heads in the sand and instead seek help from professionals. By planning for various scenarios, including extended Covid restrictions, Brexit disruption, preparing realistic trading forecasts and having up-front conversations with suppliers, landlords and lenders, firms will be better placed to navigate the challenging months ahead.
Verdict: The Chancellor must go further with support measures in his Budget to ensure business survival.
Annie Makoff is a freelance journalist and editor.