c94ff7ec 72a8 41c9 8949 efe4f18de8dd 800x380 - Breaking even

Breaking even

There are businesses that have benefitted from the current COVID disruption. Particularly, those that can deliver goods and services online.

There are far more that have not benefitted.

Before COVID-19 reared its disruptive head businesses were exhorted to make profits. This was the way most firms created surplus cash-flow and value in their businesses.

Since the initial, national lock-down – March 2020 – profitability has been the experience of the few rather than the many.

Government grants, and in particular the furlough scheme, have enabled businesses to mothball activity and keep some semblance of financial credibility. But for a significant number of firms, making profits has been replaced by strategies to minimise losses.

Government backed loan schemes with favourable interest and repayment terms have provided liquidity, but at some future date, borrowers will need to repay loans and absorb interest charges.

Presently, businesses will need to manage a sustained period of loss making to ensure they do not drift into insolvency. Realistically, they will need to plan to at least breakeven – cover their costs – in order to halt any decline in net assets.

Breakeven turnover – the level at which costs are covered – is a fairly easy figure to calculate, but unfortunately, this indicator will need to be exceeded if and when you have to make repayment of loans or create additional working capital.

Again, these options need to be considered in some detail. Planning is key. If you have concerns about your longer term ability to breakeven please call, we can help you crunch the numbers and consider your options.

Source: Other Wed, 05 Aug 2020 05:00:00 +0100
d606a6c5 48af 46d2 9729 9b980d6baccf 800x380 - £20m in new grants for small businesses

£20m in new grants for small businesses

£20 million worth of new government grants have been released to help small and medium sized businesses across England recover from the effects of the Coronavirus pandemic. These grants will provide businesses between £1,000 and £5,000 to help them access new technology and other equipment as well as professional, legal, financial or other advice.

Commenting on the announcement, the minister for regional growth and local government, Simon Clarke MP, said:

'We have always said that we would stand behind our businesses and communities as we rebuild following the Coronavirus pandemic. This new funding does exactly that.'

The support will be fully government funded with no obligation for businesses to contribute financially. The support will be delivered from the England European Regional Development Fund and distributed through Growth Hubs, embedded in local areas across England.

To establish a viable grant programme, the government has set a minimum of £250,000 for all Local Enterprise Partnership areas. The allocation of resources will be reviewed as the grant fund is delivered. The funding is being provided to address immediate needs and all grants must be awarded by 28 February 2021 and all activity fully completed by 31 March 2021.

Source: HM Government Wed, 05 Aug 2020 05:00:00 +0100
9c0ba039 b501 4f4d 8e93 37b8481fa61b 800x380 - Advice for early years sector

Advice for early years sector

The Competition and Markets Authority (CMA) launched a COVID-19 taskforce back in March 2020 to identify any commercial practices that adversely affect consumers and to consider appropriate responses to help businesses comply with the law and protect consumers' rights.

One of the areas where the CMA received reports of unfair practices concerned the early years sector (nurseries and childcare providers). The main areas of concern related to payments and cancellations in the context of COVID-19 lockdown restrictions. This prompted the publication of a statement by the CMA on 30 April 2020, on how the law applies to consumer contracts, refunds and cancellations. On 28 July 2020, the CMA published an open letter.

The letter does not introduce any new laws but does set out in detail how the current law applies in the present circumstances. The CMA was clear that the vast majority of providers were striving to reach fair arrangements.

However, the CMA identified the following three main problem areas:

  1. Providers requiring full or excessively large fees for services which are not being carried out due to the pandemic public health restrictions and government guidance.
  2. Providers relying on unfair cancellation terms, such as requiring unreasonable notice to be given, or high cancellation fees in cases where the business is unable to provide the service.
  3. Providers putting unfair pressure on consumers to agree to make payments by threatening that the child’s place will be lost or the provider will go out of business.

The CMA’s view is that consumers should not have to pay for services that cannot be provided and should also be offered a refund where services are paid for in advance but do not take place as agreed in the contract. In addition, contract terms requiring consumers to pay providers who are not providing the services agreed in the contract are likely to be unfair and unenforceable.

The letter confirms that the CMA will not be taking any action against the early years sector at this stage but will continue to monitor the sector. For the time being, the CMA is asking providers to consider their contracts and arrangements with consumers and take any necessary steps to ensure they comply with the law. Individual consumers will, of course, still have the option of pursuing a claim against businesses for alleged breaches of consumer law.

Source: Other Wed, 05 Aug 2020 05:00:00 +0100
f8a36f6c b976 47b6 9987 2499488d3b1c 800x380 - State Aid rules relaxed for CBILS loans

State Aid rules relaxed for CBILS loans

The government has announced that more small businesses will benefit from the Coronavirus Business Interruption Loan Scheme (CBILS). Under the scheme, borrowers can apply for up to £5 million in finance in the form of loans, overdrafts, invoice finance, and/or asset finance. The government will guarantee lenders 80% of the loan value, as well as covering the first 12 months of interest payments and fees.

Under EU State Aid rules, small firms that were classed as 'undertakings in difficulty' were unable to make use of the CBILS. Following a considerable amount of UK Government and industry lobbying, the European Commission has now relaxed its State Aid rules. This means that effective 30 July 2020, 'micro' businesses with a turnover of less than £9 million and fewer than 50 employees will be exempt from elements of the 'undertakings in difficulty' test and can apply for a loan under the CBILS.

Chris Wilford, Head of Financial Services Policy, CBI said:

'This is an important step that will help more businesses get the critical support they need. These eligibility hurdles have been a real stumbling block for many firms across the UK throughout the crisis. These were put in place to avoid governments bailing out failing companies, but those rules were established in normal times.'

HM Treasury has also made clear its expectation that all accredited CBILS lenders will implement the changes, noting the consequence that businesses whose CBILS applications they have previously declined may now be eligible.

Source: HM Treasury Wed, 05 Aug 2020 05:00:00 +0100
eeb9fe48 c3a7 479d a1ec a7cecb162aaf 800x380 - Intellectual Property Office service update

Intellectual Property Office service update

The Intellectual Property Office (IPO) has ended its 'interrupted days' provisions and is now working to its usual deadlines. The IPO introduced extended deadlines, known as interrupted days, on 24 March 2020 as a result of the Coronavirus outbreak. An 'interrupted day' is defined as a day in which the normal course of business at the IPO is not possible. This meant that most deadlines for patents, supplementary protection certificates, trademarks, designs and applications for these rights, which fell on an interrupted day were extended.

Following the IPO’s latest review, the first normal day of operation when all interrupted days deadlines expire was 30 July 2020. The IPO has also announced that it is working on measures to ease burdens on business following the end of the period of interruption.

This includes the following temporary fee changes from 30 July 2020 to 31 March 2021 in relation to patents, Supplementary Protection Certificates (SPCs), trademarks and registered designs:

  • fees for extensions of time will be zero
  • there will be no surcharge for payment of a patent application fee after the date of filing
  • fees to apply for reinstatement and restoration will be zero
  • for patents and designs, there will be no surcharge for payment of a late renewal fee
  • for trademarks, the surcharge for payment of a late renewal fee will be £1
  • there will be no additional fee for late payment of SPC fees

The deadlines for completing actions, requesting extensions of time and paying fees are not affected by these fee changes and must still be complied with. There will also be continued alterations to hearings and Company Names Tribunal’s services.

Source: HM Government Wed, 05 Aug 2020 05:00:00 +0100
c57f1584 a8af 4fba b3b3 8f5745ce2c0d 800x380 - More support for film and other creative industries

More support for film and other creative industries

A new £500 million scheme to kickstart film and television production struggling to secure insurance for COVID-related costs has been launched. This scheme will help TV and film productions that have been halted or delayed by a lack of insurance to get back up and running. The funding will be available to all productions made by companies where at least half of the production budget is spent in the UK and is estimated to cover more than 70% of the film and TV production market to the end of the year.

Last month, the government unveiled a new £1.57bn support package (known as the Culture Recovery Fund) to help protect the futures of venues including museums, galleries, theatres, independent cinemas, heritage sites and music venues.

More details of how organisations can apply for £880 million in grants as part of the £1.57 billion Culture Recovery Fund have also been announced. This fund offers financial support for cultural organisations that were financially stable before COVID-19 but are now at imminent risk of failure.

Source: HM Treasury Wed, 05 Aug 2020 05:00:00 +0100
1fc949f6 f57d 471d 9871 4069a0cfbc59 800x380 - Beyond furlough

Beyond furlough

Unless the Chancellor comes up with replacement funding for the furlough scheme, and there is no sign that this will happen, those businesses that have maintained their workforce by furloughing staff will face difficult choices when the present Coronavirus Job Retention Scheme closes down at the end of October.

Do we keep staff on in the hope that business will improve? Or is this so unlikely that laying staff off is the only sensible alternative?

Much will depend on the market sector in which you trade.

Hospitality, tourism and many high street retailers will be especially challenged by the requirements to socially distance and quarantine as uncertainty regarding secondary waves of infection continue to disrupt attempts at planning for the future.

Ironically, it is planning that is required in order to make post-furlough choices. 

  • What will be future demand for your products and services?
  • How will your direct and fixed costs be affected?
  • Do you need to shelve investment decisions?
  • Are prospects so bleak that you need to consider closing down your business?
  • And finally, if you can see a way forward, what staffing levels do you need to support the planned activity and what changes – lay-offs – do you need to make?

If you are undecided which way to jump, please call so we can help you consider your options. Sometimes an objective overview is required to see the wood for the trees.

Source: Other Mon, 03 Aug 2020 05:00:00 +0100
0a61ee1d 5849 40a2 95d8 2693f49f371a 800x380 - New redundancy protections for furloughed employees

New redundancy protections for furloughed employees

The government has unveiled an important new law that will protect furloughed workers who are made redundant. This will ensure that any employee who was furloughed under the Coronavirus Job Retention Scheme (CJRS) will receive their full basic statutory redundancy entitlement. This amount will be based on their normal wages, rather than the reduced furlough rate. The legislation came into effect on 31 July 2020.

Employees are normally entitled to statutory redundancy pay if they have been working for their current employer for 2 years or more. The exact amount of statutory redundancy pay they are entitled to is dependent on age and length of service (capped at 20 years).

The new law also affects other entitlements, including Statutory Notice Pay which must be based on normal wages rather than employees’ wages under the CJRS, and basic awards for unfair dismissal cases, which will be based on full pay rather than wages under the CJRS. The new legislation does not alter any enhanced redundancy pay provisions as part of an employee’s individual employment contract.

The government has also confirmed that other changes are coming into force that will ensure basic awards for unfair dismissal cases are based on full pay rather than wages under the CJRS.

Source: HM Government Thu, 30 Jul 2020 05:00:00 +0100
c60ceae8 e34d 47bb ba9b ef550a4b4c1c 800x380 - How elastic is demand for your products?

How elastic is demand for your products?

Many will remember the empty shelves in supermarkets when lock-down commenced March 2020. In particular, the absence of toilet rolls…

Compare this with supplies of TVs and other luxury goods where there was no noticeable absence of supply.

These examples point to a basic economic theory; that a product with few substitutes (toilet rolls) and where demand is constant, is inelastic.

Products where there is no immediate, compelling need, chocolates or a new iPad, are said to be elastic from a demand perspective.

Why does this matter?

If you sell products that are demand inelastic – toilet rolls for example – there will be less resistance to price increases if supply becomes an issue. Witness the prices we all had to pay for loo-rolls when available earlier this year.

You might like to consider the range of goods and services that your business sells from this perspective.

If most of the goods you sell are demand elastic, price increases will tend to result in a lower volume of sales: customers will simply defer buying until prices reduce.

Alternatively, if supplies of inelastic goods start to reduce, sellers will be able to pass on price increases more effectively, as demand will remain constant. 

It is worth considering these basic facts of economic life when you next consider the range of goods you offer.

Source: Other Wed, 29 Jul 2020 05:00:00 +0100
515a5bd8 d136 4ab0 a053 c1650f6bd533 800x380 - Business rates review

Business rates review

The government has confirmed that the next business rates revaluation in England will be postponed until April 2023. The government has previously announced that the revaluation that was due in 2021 would be delayed due to the coronavirus pandemic but no date had been announced. The revaluation in April 2023 will be based on property values on 1 April 2021.

The new revaluation date means that business rates will be based on property rental values that better reflect the impact of the pandemic. As with any revaluation there are winners and losers and this delay will benefit some businesses and hinder others. 

The revaluation of business rates usually happens every 5 years and is necessary to reflect changes in the property market. The last revaluation came into effect in England and Wales on 1 April 2017, based on rateable values from 1 April 2015. The revaluation does not raise additional revenue for the Exchequer as the multiplier applied to the property value is reduced accordingly. The downside of this delay is that rate bills will continue to be based on now historic 2015 values until April 2023.

The government has also launched a call for evidence on reforming the system. The government is aware that many businesses and stakeholders may need extra time to pull together a full response to all of the issues and so is seeking responses in two phases.

Phase One is asking for views on the multiplier and reliefs sections, as well as any other areas of pressing concern. These need to be submitted by 18th September followed by responses on all other sections by 31 October. The review is expected to conclude in Spring 2021.

Most retail, leisure and hospitality occupiers are currently receiving 100% Retail Rate Relief as part of the government support measures to help the economy cope with the effect of the pandemic. However, it is not known what if any reliefs will be announced from April 2021.

Source: HM Treasury Tue, 28 Jul 2020 05:00:00 +0100