Coronavirus: what economic support is the government currently providing for businesses?

On 4 January 2021, the UK government announced a new ‘lockdown’ for England. This is the third time since March 2020 that restrictions have been introduced covering the whole of England.

The devolved administrations have taken similar action. In mainland Scotland, since 5 January, individuals may not leave home for anything other than essential purposes. Wales has been under a ‘stay at home’ order since 20 December 2020 and Northern Ireland since 26 December 2020.

Since the first UK-wide lockdown in March 2020, the UK and devolved governments have provided support for businesses and individuals affected by the disruption of the pandemic. Many of the measures introduced last spring have been carried over into 2021.

Our earlier explainers detail the measures introduced during the first lockdown, for businesses and individuals, as well as the actions taken by the Bank of England. This explainer summarises the support currently available to businesses; another looks at current support for individuals. 

The government continues to provide assistance by offering low-interest loans through schemes developed last year. The UK and devolved governments also continue to provide businesses with cash grants, tax cuts and tax deferrals.

Using public spending to meet businesses’ costs

Statutory Sick Pay

The UK government continues to offer a rebate to small and medium-size enterprises (SMEs; those with fewer than 250 employees) for up to 14 days of Covid-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.

Cash grants

The UK and devolved governments have offered cash grants to businesses affected by restrictions. In England, businesses forced to close can claim grants of up to £3,000 per month; businesses still open but affected by restrictions can claim up to £2,100. Since the announcement of the lockdown in January, businesses in England forced to close have also been able to claim a one-off grant of up to £9,000.

In Scotland, the Strategic Framework Business Fund has provided grants to businesses since 2 November 2020. Temporary closure grants of £2,000 or £3,000 (depending on rateable value) are available for businesses required by law to close. Business restriction grants of £1,400 or £2,100 (again depending on rateable value) are available for businesses that can remain open but are required by law to modify their operations. Grants are paid every four weeks in arrears for as long as restrictions last. The Scottish government announced a one-off grant topping up these funds on 11 January 2021.

In Wales, the Economic Resilience Fund has provided grants to businesses. In the third phase, which opened in October 2020, £80 million worth of business development grants were open to micro businesses, SMEs and large businesses, who must match grants with their own investment of at least 10%, 20% or 50% depending on the size of the organisation. 

In Northern Ireland, localised support schemes for businesses include the Localised Restrictions Support Scheme (LRSS) and the Covid Restrictions Business Support Scheme (CRBSS). The LRSS is available to businesses required to close or severely limit their operations and offers weekly payments of £800, £1,200 or £1,600 depending on the net annual value of the property out of which the business operates. The CRBSS covers businesses ineligible for the LRSS but which nevertheless have been affected by restrictions. It pays a grant equivalent to £600 for each week restrictions are in place.

The UK government also announced in January an extra £500m in discretionary funding for local authorities in England to support local businesses through grants.

Low-interest loans

Several low-interest loan schemes introduced during the first lockdown in March 2020 continue to be available to businesses:

Bounce Back Loan Scheme

Businesses can apply for Bounce Back Loans until 31 March 2021. This scheme helps SMEs to borrow between up to 25% of their turnover, capped at £50,000. The government guarantees 100% of the loan and there are no fees or interest for the first 12 months. After 12 months, the interest rate will be 2.5% per year.

Covid-19 Corporate Financing Facility (CCFF)

The CCFF is still in operation and will close on 22 March 2021. Under this scheme, the government supports 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. Companies in receipt of support through the CCFF are restricted in their ability to pay dividends to shareholders, to buy back shares and to increase senior pay.

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

Coronavirus Business Interruption Loan Scheme (CBILS)

The CBILS is open until 31 March 2021. To encourage lending to SMEs, the government guarantees 80% of the value of loans made to SMEs participating lenders. Loans can be made up to a value of £5m and the government pays the first 12 months’ interest. This scheme is available for businesses with annual turnover of up to £45m.

Coronavirus Large Business Interruption Loan Scheme (CLBILS)

The CLBILS is open until 31 March 2021. It is aimed at businesses based in the UK with an annual turnover of over £45m which have not received support under the CCFF.

The government guarantees 80% of loans up to a value of £25m for businesses with turnover above £45m, and up to £200m for firms with a turnover over £250m. Loans are capped at 25% of turnover. Twenty-seven lenders are participating in the scheme. Unlike the scheme for smaller businesses, the government does not cover interest payments for the first 12 months. As with the CCFF, companies in receipt of loans larger than £50m are restricted as to dividends, share buy-backs and senior pay.

Future Fund

The Future Fund offers loans of between £125,000 and £5m to UK-based companies to match funding raised from private investors. It was open for applications until 31 January 2021. To be eligible businesses must have previously – in the last five years – raised at least £250,000 in equity investment from third parties.

Trade Credit Reinsurance Scheme

The Trade Credit Reinsurance Scheme has been extended until June 2021. Trade credit insurance protects businesses against default of payment from companies they are selling goods to. The scheme guarantees up to £10 billion of transactions.

In return, participating insurers have committed to forgoing profits and senior staff bonuses related to their trade credit insurance business.

Other support

VAT payments

Between March and June 2020, the government allowed businesses to defer VAT payments. Businesses may either pay this amount in full by March 2021 or opt into the new VAT payment scheme. Under this new scheme, rather than paying the full amount, businesses can make up to 11 smaller monthly instalment, interest free, up to the end of March 2022.

Business eviction ban

The government has extended the moratorium on commercial evictions until the end of March 2021.