Trevor Ling, Director at leading accountancy firm Grant Thornton, has reacted to the Chancellor’s statement.
As the UK government prepares to navigate the economic fallout from COVID-19, the big story of the Summer Statement 2020 is the focus on ‘jobs, jobs, jobs’ and large temporary fiscal measures to support specific sectors, such as hospitality and tourism.
The chancellor announced that the UK economy had contracted by 25% in just two months, undoing 18 years’ worth of growth. Stark warnings from the International Monetary Fund (IMF) that this is set to be the largest recession on record mean the government is under no illusions that the recovery will be painful.
However, with the government unable to quantify the full extent of the economic impact, concern about the possibility of a second wave and uncertainty over the future timeline of ending lockdown, today’s announcement should be read as an initial reaction, not the full response; a stopgap.
For context, the measures announced on Wednesday total around £30 billion compared to the £159 billion in existing coronavirus support. We can expect a full autumn budget and spending review, which will likely bring significant change and investment to the economy.
The measures announced today are good news for those businesses in hospitality and tourism, employers who can bring staff off furlough, homebuyers and those looking to gain an apprenticeship or get their first job. With that in mind, what were the key takeaways?
The chancellor confirmed that the Coronavirus Job Retention Scheme would be wound down by the end of October, this year.
Clearly the government is concerned over rising unemployment and, in response, announced several measures to support workers and skills development, including:
A new policy to reward and incentivise employers bringing back furloughed employees: £1,000 for every furloughed employee being brought back and kept through to January 2021.
The government will pay employers for creating jobs for 16-24 year-olds who are on Universal Credit, with funding conditional on firms proving they are newly created jobs. The government will pay young people’s wages for six months, plus an amount to cover overheads. That means, for a 24-year-old, the grant will be worth around £6,500.
For the six month period from 1 August 2020 to 31 January 2021, the government will pay employers in England to create apprenticeships, up to £2,000 per apprentice aged under 25 and £1,500 for those aged 25 and over. Additionally, for the first time ever, the government will fund employers in England who provide trainees aged 16-24 with work experience, at a rate of £1,000 per trainee.