News

May 09, 2020

Covid-19- Government funding for major players in business sector - Unfair and Disproportionate? By Asad Shamim

In response to the Coronavirus, Covid-19, the Government announced there would be support for small businesses, and businesses in the retail, hospitality and leisure sectors. The support is offered through grant funding schemes:

1. The Small Business Grant Fund - Under the Small Business Grant Fund, all eligible businesses in England in receipt of either Small Business Rates Relief or Rural Rates Relief will be eligible for a payment of £10,000.

2. The Retail, Hospitality and Leisure Grant Fund - Under the Retail, Hospitality and Leisure Grant eligible businesses in England in receipt of the Expanded Retail Discount (which covers retail, hospitality and leisure) with a rateable value of less than £51,000 will be eligible for a cash grants of £10,000 or £25,000 per property

Eligible businesses in these sectors with a property that has a rateable value of up to and including £15,000 will receive a grant of £10,000. Whereas eligible businesses in these sectors with a property that has a rateable value of over £15,000 and less than £51,000 will receive a grant of £25,000.

Businesses with a rateable value of £51,000 or over are not eligible for this scheme.

The question is, what support is being offered do businesses where the rateable value exceeds £51,000?

The businesses in this category are predominantly reputable high street retailers, larger warehouses and the hospitality sector such as large hotel chains who are already suffering drastically from the UK lockdown situation.

The majority of these businesses are at risk of not opening their doors to consumers again after even when there is a gradual lifting of the lockdown rules currently in place.

Although it is arguable that approximately only 10% of all retail properties in England are over £51,000 in rateable value but these account for 69% of the overall business rates tax intake. They also help fund small business rates relief through the 1.3p supplement on their standard rate of tax. It is estimated that business rates will bring in £25.6bn in England in the coming financial year of which the retail sector will contribute about £6.6bn or a quarter of the overall total.

Whilst helping small businesses is to be commended during this pandemic and much needed, there is nothing in the Governments financial assistance scheme that tackles the issues of the larger businesses.

They are still having to make crippling payments in respect of large overheads despite their retail premises not being able to open or operate. In addition, they are being forced to cut jobs and being side lined in this current financial calamity. The Government has yet again failed to recognise that large retailers often serve as anchors in high streets, providing strong reasons for shoppers to visit and also maintain the overall attractiveness of shopping centres.

In addition, the Government has also aimed to provide aid and assistance to all businesses across the board by the VAT Deferral Scheme. However, using the example of larger retailers and large players in the hospitality sector, the best way to quickly inject cash into these businesses who have been forced to close over the past seven weeks would be to exempt business from paying VAT for this quarter rather than defer it. It would be beneficial to the sectors for all tax that is due to be cancelled. Serious consideration should also be given to VAT being reduced from 20% to 15% for the foreseeable future. Given the current financial tragedy and the effect on lager businesses, it is vital to stress that the Government has failed to recognise larger operators, and the huge number they support, and they have simply been ignored at a time of severe business crisis.

It is inevitable that without a well thought out, strategic plan, we are now destined to see more shop closures and job losses in the high street, shopping centres in addition to job losses and closures in the warehouse sector and the hospitality sector in the months ahead.