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Coronavirus: government support for businesses and individuals

The Covid-19 coronavirus pandemic has caused major social and economic disruption.

Rishi Sunak gives a statement on coronavirus

The Covid-19 coronavirus pandemic has caused major social and economic disruption. Steps taken by the UK government to reduce the severity of the outbreak – progressing from encouraging ‘social distancing’ to more comprehensive ‘lockdown’ edicts through March – have exacerbated this.

The government has, therefore, also announced a large and wide-ranging package of financial measures to try to cushion the effect on people and businesses. This is not an ordinary stimulus package. The fall in economic activity is in large part due to deliberate government policy, rather than an external shock the government is trying to mitigate. The aims of this package are therefore two-fold: to help people in the short term, and to help the UK economy gear up again quickly when the restrictions are lifted. 

In addition to this support for businesses and people, the government has also increased spending on public services that have come under strain as a result of Covid-19, such as health and social care.

The chancellor, Rishi Sunak, has said he will do “whatever it takes”.

Overview: what are the measures to support businesses and households?

The financial measures announced by the government so far fall broadly into two categories – those aimed at business and those aimed at people. In addition to this direct support, the Bank of England, the UK’s central bank, is taking action to help ensure businesses have access to low-interest loans and to ensure that the markets for UK government bonds continue to function. The Bank of England is a public body, independent of government, and is tasked with maintaining monetary and financial stability.

For businesses, the government has provided assistance by:

  • paying grants or cancelling tax liabilities – with businesses never being required to repay the money or pay the tax at a later date
  • deferring tax payments
  • providing businesses with low-interest loans.

Further measures aimed at people who might fall ill, lose income or lose their job include:

  • increasing the generosity and ease of access to statutory sick pay for those required to take time off work due to Covid-19
  • increasing the generosity of benefits for those out of work or on low incomes
  • increasing support available to self-employed people.

The Bank of England is supporting the government’s policies by:

  • ensuring that businesses have access to new loans at low cost
  • ensuring that the market for UK government bonds continues to function
  • ensuring that those who struggle to pay their debts will be given ‘repayment holidays'. 

See our table quantifying the financial costs of these measures

What has the government done to support public services during the coronavirus pandemic?

Coronavirus emergency response fund

At the budget, the chancellor set up the emergency response fund to provide additional funding to public services responding to the coronavirus crisis. Initially, this amounted to £5bn, but on 13 April the Treasury announced that a total of £14.5bn had been allocated, of which over £12bn was to be spent in England, with the remainder to be spent by the devolved governments in Scotland, Wales and Northern Ireland.

In England, more than half of the total (£6.6bn) has been allocated directly to health services, including additional money for ventilators and protective equipment and help in getting retired or trainee medical staff into work. Some of this money (£2.9bn) has also been allocated for hospital discharges and local care.

The fund also provides additional support for local authorities (£1.6bn) and funding to provide food packages to isolated vulnerable people (£0.9bn). On top of this, £3.5bn has been earmarked to cover the cost of rail providers’ losses as they keep essential services running so that essential workers can travel to work.

VAT exemption for PPE

The government has also announced that all items of essential personal protective equipment (PPE) for Covid-19 will be exempt from VAT for three months. This is expected to save care homes, charities and businesses (and cost the exchequer) around £100m.

Funding for charities

The government has also announced £750m of public spending on charities. This money will be targeted at charities ‘on the front line’ such as hospices and those providing food to vulnerable people. This scheme is designed to support the national effort to deal with the virus and the implications of lockdown, rather than to protect the incomes of charities in general.

What has the government done to support businesses during the coronavirus pandemic?

Businesses across the UK have experienced a sharp fall in revenues because they are temporarily closed, have experienced a major loss of custom or had their supply chains disrupted. Many would face going under or having to lay off large numbers of staff unless they can get help to meet their running costs. This help is being offered in a number of ways.

Using public spending to meet businesses’ costs

Business rates holidays

The government has cancelled business rates payments for 2020/21 for businesses in England in the retail, hospitality and leisure industries, and for nurseries. This extends support that had already been in place for some of these same businesses even before the Covid-19 crisis: those in the retail sector in England with a ‘rateable value’ between £15,000 and £51,000 (most such businesses) were already due to receive a 50% discount, as they did in 2019/20.

The Scottish and Welsh governments have also cancelled business rates payments in 2020/21 for businesses in the retail, hospitality and leisure industries. Northern Ireland has announced a three-month holiday for all businesses from non-domestic rates (equivalent to business rates).

Cash grants

The government is also providing cash grants to some businesses, some of these are targeted at specific industries.

The government is providing a cash grant worth £25,000 to businesses in the retail, hospitality and leisure industries with a ‘rateable value’ between £15,000 and £51,000. Equivalent grants will also be provided by the Scottish and Welsh governments.

Businesses in the least valuable properties benefit from small business rates relief (SBRR), regardless of what sort of business they undertake. Those with a rateable value below £12,000 pay no business rates at all, while those with a rateable value between £12,000 and £15,000 get a discount. All businesses eligible for SBRR will also receive a £10,000 cash grant.

A £10,000 grant will also be paid to all businesses eligible for rural relief, which covers low-value properties in sparsely populated areas. Equivalent grants will also be provided by the Scottish and Welsh governments.

The government has announced a three-month scheme to provide up to £9m in grants to the fishing industry and a further £1m to help fisherman find alternative local markets for their catches. Fisherman will be eligible if they operate a boat under 24 metres in length and recorded sales of £10,000 or more in 2019. Businesses that farm fish and shellfish will also be eligible.

Statutory sick pay

Ordinarily, statutory sick pay (SSP) must be provided by employers to all employees earning above an average of £118 per week from the fourth consecutive day of illness and for up to 28 weeks. SSP is paid at a rate of £94.25 per week.

The government will now reimburse small and medium size enterprises (SMEs; those with fewer than 250 employees) for up to 14 days of Covid-19-related sick pay per employee from the first day of absence. This includes periods when an employee is off work because they are self-isolating, even if they are not sick themselves. This is worth up to £188.50 per affected employee for qualifying employers.

Employee wages

On 20 March, Sunak announced a new coronavirus job-retention scheme, aimed at encouraging employers to keep workers on their payroll, even if there is no work for them to carry out during the Covid-19 outbreak. The government will pay businesses up to 80% of the payroll costs for workers who are furloughed (including wages, employer NICs and pension contributions required by the government’s auto-enrolment policy). Payments can be backdated to 1 March 2020 and are capped at a maximum contribution to wage costs of £2,500 a month for each worker.

This scheme was initially put in place for three months but has since been extended until the end of October. Employers will be required to pay national insurance contributions and pension contributions in August, 10% of wages in September and 20% of wages in October. The scheme will also allow for employees to return to work part-time from 1 July, with the government continuing to pay some of workers’ wages for the remaining lost hours.

The chancellor also pushed back the date at which an employee needed to be employed by a specific company in order to benefit from the scheme, from 28 February to 19 March. This means the scheme covers thousands more workers who were hired between those dates.

There is no limit to the amount of funding available. The OBR estimates that the scheme will cost £56bn net (minus the money the government immediately receives back in the form of taxes) until the scheduled end of the scheme in October.

Tax payment deferrals

VAT payments that were due to be made in March 2020 (estimated to total £30bn) have been deferred to the end of June, giving businesses longer to pay this tax bill.

Businesses and self-employed people in financial distress may also be eligible to receive support through HMRC’s Time to Pay scheme. This gives struggling taxpayers longer to pay their tax bills. Time to Pay is an existing service but HMRC is increasing resources dedicated to it to handle the expected higher volume of requests.

Low-interest loans

Covid-19 Corporate Financing Facility (CCFF)

The government is supporting large (non-financial) businesses by buying unsecured short-term corporate debt (known as ‘commercial paper’). Effectively, this means providing short-term loans so that companies have easy access to cash. The CCFF will offer finance at a rate “comparable to those prevailing in markets in the period before the Covid-19 economic shock”.

The Bank of England (BoE) is acting as the Treasury’s agent to implement this scheme and these purchases will be paid for by printing money.

Firms will be eligible if they make “a material contribution to the UK economy”. This should include all UK incorporated companies with a genuine business in the UK, including those with foreign-incorporated parent companies. Genuine business includes those that have significant employment or their headquarters in the UK, and potentially also those serving a large number of customers, or having a number of operating sites, in the UK.

The scheme will operate “for at least 12 months and for as long as steps are needed to relieve cash flow pressures on firms”. The BoE will provide six months’ notice of the CCFF’s withdrawal. Companies in receipt of CCFF finance will be asked by the government not to pay dividends, and to limit senior pay and cash bonuses.

Coronavirus business interruption loan scheme (CBILS)

The government is also making it easier for SMEs to access low-cost loans. The government will guarantee 80% of the value of loans made to SMEs through the British Business Bank (BBB) – a public-sector body that invests private sector funds (from a set of partners that mainly includes banks) in SMEs. Loans will be up to a value of £5m, and the government will also pay the first 12 months’ interest. This scheme is available for businesses with annual turnover of up to £45m.

The guarantee means that, should a business fail, the government will pay 80% of the outstanding loan. The scheme is designed to reduce the risk to lenders, and so encourage more lending.

Bounce Back Loan scheme

This scheme was brought in by the Chancellor on 27 April to address shortfalls in the business interruption loan scheme. It is targeted at smaller businesses that have struggled to access loans through the CBILS. The bounce back loan scheme offers a simplified two-page application process and a 100% government guarantee on the debt.

This is intended to increase banks’ willingness to grant loans, as they would not lose any money were businesses to default. The loans are for up to 25% of a business’s annual turnover, up to a maximum loan of £50,000. The government will also pay the first year’s interest.

Coronavirus large business interruption loan scheme (CLBILS)

The government has also announced a scheme to provide loans for businesses who are too big to qualify for the Business Interruption Loan Scheme, and for whom the CCFF was not a viable or attractive option.

The government will guarantee 80% of loans up to a value of £25m for businesses with turnover above £45m, and up to £200m (originally £50m) for firms with a turnover over £250m. Loans are capped at 25% of turnover. The loans will be provided through the British Business Bank. Unlike the scheme for smaller businesses is that the government will not cover interest payments for the first 12 months. As with the CCFF, companies in receipt of loans larger than £50m will be restricted as to dividends, share buy-backs and senior pay.

Future Fund

The government is also offering loans of between £125,000 and £5m to UK-based companies, to match funding raised from private investors. To be eligible businesses must previously have – in the last five years – raised at least £250,000 in equity investment from third parties. This fund is designed to help those businesses – particularly start-ups – which do not typically qualify for bank loans and instead are reliant on equity investment. These loans will be issued by the British Business Bank and will be convertible – that is, the loan will convert into equity at the company’s next qualifying funding round.

The government has also given an additional £550m to Innovate UK, the public body responsible for increasing innovation, to distribute to research and development-intensive SMEs. This will come in the form of grants and loans, with £110m in grant support and £210m to existing Innovate UK customers already announced. A further £200m or so is yet to be allocated.

Trade credit insurance

On 4 June, the government announced a new scheme to guarantee up to £10bn of transactions through the new Trade Credit Reinsurance scheme. Trade credit insurance protects businesses against default of payment from companies they are selling goods to.

In return, participating insurers must forgo profits and senior staff bonuses related to their trade credit insurance business.

Other business support

The emergency Coronavirus Act also contains measures to prevent commercial tenants being evicted if they fall behind on their rent between March and June.

What has the government done to support people during the coronavirus pandemic?

The government’s support for businesses also helps the public – for example, by helping to ensure that people do not lose their jobs. But the government has also announced a range of measures more directly targeted at individuals.

Support for self-employed people

For self-employed people, the government has announced a similar scheme to that available for furloughed employees. Self-employed people can receive 80% of their average monthly profits over the last three years (or shorter if they have not been trading that long) up to a cap of £2,500 per month for the first phase of the scheme, until the end of May. In the second phase of the scheme, covering the three-month period until the end of August, they will be able to claim 70% of their profits as a second lump sum, capped at £6,570 in total. Self-employed people are eligible if they are:

  • still trading (or would be in the absence of Covid-19)
  •  filed a tax return for the 2018/19 tax year
  • receive more than half of their income from self-employment
  • have profits below £50,000 in 2018/19, or on average between 2016/17 and 2018/19

The scheme is especially generous because those who qualify can receive the grant even if they continue to trade and does not only apply to those most adversely affected by the crisis.

Self-employed people can apply for the first scheme until 13 July, and can apply for the second scheme without having applied for the first. Payments will be backdated to the beginning of March for the first scheme, and the beginning of June for the second. While waiting for the scheme to pay out, these businesses can apply for loans under the CBILS or individuals in low income households can apply for Universal Credit.

Enhanced sick pay entitlement

For people who are entitled to statutory sick pay (SSP)

Employees with sufficiently high earnings can normally claim SSP from the fourth day of any illness, but the rules have been amended so that anyone having to take time off work due to Covid-19 will qualify for SSP from the first day of absence. This applies to anyone who has to take time off due to Covid-19, whether through illness or self-isolation.

SSP is worth £94.25 per week for up to 28 weeks.

The government also announced that the NHS 111 service will now be able to issue sick notes confirming that someone is self-isolating due to Covid-19, rather than people having to get them from their GP.

For people who are not entitled to statutory sick pay

Low earners (those on less than £118 week) and the self-employed do not qualify for SSP. This group would ordinarily be able to claim employment and support allowance (ESA) if they are unable to work due to illness. However, this is normally only available from the eighth day of illness. The government has announced that this will be available also from the first day for those affected by Covid-19. ESA is worth £74.10 per week for the first 13 weeks.

Extra support for those on low incomes or without work

The government has announced several changes to benefits for low earners and those out of work to help support their incomes over the next year.

Universal Credit

Universal Credit payments will be increased by £1,000 a year for the next 12 months (with the same increase applied to the basic element of tax credits).

For those who are self-employed, the ‘minimum income floor’ (MIF) in Universal Credit will cease to apply for as long as the outbreak lasts. Ordinarily the MIF means that self-employed people are assumed to earn as much as they would in a full-time job paying the minimum wage, even if their income is lower than that. The chancellor has said that removing the MIF means those who are self-employed will be entitled to receive an income from Universal Credit equal to the income from SSP that employees receive.

Housing benefit

The government is also offering more generous support to meet rent payments for those who receive housing benefit, by increasing the housing allowance. Renters receiving housing benefit will now get an amount that is enough to cover the cheapest 30% of properties in their area.

Other support

The chancellor has also allocated £500m to a hardship fund, which will be used by local authorities to support vulnerable people. This will mainly be delivered in the form of reductions in the amount of council tax that people owe.

People who pay tax via self-assessment – mainly but not exclusively the self-employed – will also be given an extra six months to make their next payment for self-assessment income tax. The next payments, which were due at the end of July 2020, will now be deferred to the end of January 2021.

The government and the Financial Conduct Authority have also encouraged mortgage lenders to offer payment holidays for people who are in financial distress due to Covid-19. The government has encouraged landlords to do the same for renters. The emergency Coronavirus Bill includes provision for tenants to be given three months’ grace before being evicted, and on 22 May, the government announced a further three-month extension of this grace period would be available for struggling homeowners.

What is the Bank of England doing?

As the UK’s central bank, the Bank of England (BoE) is supporting the government’s Covid-19 measures. It is doing this principally by ensuring that markets – including lending markets – continue to function smoothly.

Ensuring low-interest loans are available

Interest rates

The BoE base rate was cut from 0.75% to 0.25% on 11 March, and then to 0.1% on 19 March. Then governor Mark Carney (he left the role on 16 March) said that interest rates in the UK could fall to “close to but slightly above 0%”,[1] suggesting the current interest rate is about as low as the BoE feels it is feasible to go.

The lower base rate should eventually feed through to lower borrowing costs for businesses and households.

Term Funding Scheme with additional incentives for Small and Medium-Sized Enterprises (TFSME)

To help ensure that its lower base rate feeds through to lending to businesses, the BoE has also announced a new scheme to offer banks four-year funding at, or very close to, the base rate (i.e. 0.1%). This will provide banks with a cost-effective source of funding, which is insulated from any adverse conditions in bank funding markets.

Banks will be able to borrow an amount up to 10% of the amount they lend to businesses and additional funding will be available for banks that increase lending, especially to SMEs. When this scheme was first announced on 11 March (at which point banks were going to be allowed to borrow an amount up to 5% of their net lending), the scheme was expected to provide “in excess of £100bn” in funding to banks.

‘Global dollar liquidity’

On 15 March, the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the US Federal Reserve, and the Swiss National Bank announced co-ordinated action to make it easier and cheaper for people to borrow in dollars outside the US. 

Leniency support measures

The government and the Financial Conduct Authority are encouraging banks and building societies to offer leniency to borrowers. To help them do this, the BoE has lifted some regulatory burdens.

The annual stress test of the UK’s eight major banks and building societies has been cancelled for 2020.

The amount of money that banks are required to hold to cushion any losses they might incur on loans (known as the counter-cyclical capital buffer) has been cut from 1% of a bank’s outstanding lending to 0%. This is a big step: before Covid-19, it had been due to rise to 2%, in December 2020.

The BoE estimates this will increase banks’ lending capacity in the UK by up to £190bn.

Government bonds

As the economic impacts of Covid-19 became apparent, conditions in the UK government bond market deteriorated. In response, the BoE Monetary Policy Committee voted unanimously to extend the Asset Purchase Facility (APF) – through which the BoE holds UK government and corporate bonds – by £200bn, taking it to a total of £645bn. This was funded by printing money.

Most of this extra money will be used to buy UK government bonds – that is, debt issued by the UK government – the remainder will be used to buy corporate bonds (that is, debt issued by companies). The governor of the BoE had to seek the chancellor’s permission to extend the APF in this way.



  1. Bank of England, Interest Rate Cut Press Conference [transcript], 11 March 2020,

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