UK companies that are struggling and in need of assistance due to lockdown rules in the face of the COVID-19 pandemic have several options to choose from, depending on their size and their needs. They include deferring VAT payments until 31 March 2021, and claiming back sick pay.
The biggest scheme introduced by the UK is the Coronavirus Job Retention Scheme.
All employers are eligible for this scheme, which gives furloughed employees 80% of their salary, up to £2,500 a month. It only covers employees who are paid through the UK’s pay-as-you-earn (PAYE) tax system and were on the payroll on 28th February. The programme was recently extended to last until the end of October.
Small and medium-sized companies which have been affected by the pandemic can apply for a Coronavirus Business Interruption loan.
Companies with a turnover of less than £45m who can demonstrate that they have been adversely affected by COVID-19 can receive loans and other financing, up to £5m. The government will guarantee 80% of the loan to the lender and will pay any interest and fees for the first 12 months.
A similar loan scheme is in place for companies with a turnover of more than £45m. At present these businesses may receive up to £25m (for turnover of £45m-£250m) or £50m (for turnover above £250m) in loans and financing. From tomorrow the scheme will allow companies to borrow up to 25% of turnover, up to a maximum of £200m, with banks underwriting 20% of the loan and the government providing the remaining 80%. Dividend payouts will be prohibited as a condition of borrowing, though certain bonuses will still be permitted.
Smaller companies can also apply for a Bounce Back Loan of between £2,000 and up to 25% of their turnover, up to a maximum loan of £50,000, provided they can prove they have lost income due to COVID-19. The government guarantees 100% of the loan and there are no fees or interest for the first 12 months. After the first year, the interest rate will be 2.5%.
The most recent scheme introduced by the UK government, the Future Fund, allows startups which have raised at least £250,000 before the COVID-19 shutdown to receive up to £5m in funding from the government, provided a third party is willing to invest in the company. The scheme is aimed at companies that have not been able to benefit from other government relief measures and are in early-stage development.
At present there are no EU-wide schemes to help businesses at a local level, although many EU countries have introduced their own economic relief packages, such as loan guarantees for businesses, deferment of taxes, state-backed aid, and other measures.
– Moriah Costa CBD-Intel contributing writer
Image: Art Tower