How can the UK companies access the bailout package of the Government?

The COVID-19 novel coronavirus has pushed global economy into recession. The World Health Organisation already stated that the virus is a global pandemic, which means that it will have a significant effect on the entire world.

To date more than 750,000 coronavirus cases have been confirmed across the globe. With the economies of many countries struggling even before the pandemic outbreak, COVID-19 has triggered a financial crash in different parts of the world, placing the United Kingdom (UK) on the verge of entering deep recession. However, governments and central banks around the world have taken fiscal and monetary measures to help tackle the damage and potential impact of the epidemic coronavirus.

Rishi Sunak, the United Kingdom's Chancellor of the Exchequer, prompted government’s action to combat the economic danger posed by the coronavirus pandemic by unleashing a £ 330 billion stimulus plan alongside an unprecedented wage subsidy contract. But the pace of the chancellor's efforts has caused its own problems, with banks, regulators, and treasury officials struggling to find ways to allocate the money to the desperately needed companies. The recession has sparked a battle against bankruptcy for many workers, with wage bills payable this month, as their income was wiped out after the lockdown was implemented by the government across the UK.

A closer look at the bailout package and how it can be accessed

In its commitment to do everything possible to support firms, British Government has launched two schemes to help companies access the government-backed stimulus packages of over £ 330 billion in the form of loans and grants, aimed to support businesses and manage cashflows during this difficult time.

These two schemes include the new Coronavirus Business Interruption Loan Scheme and the Covid Corporate Financing Facility. The companies were able to receive these government funding from Monday, 23rd March 2020, to continue their functions as they face a global economic emergency triggered by coronavirus.

The new Coronavirus Business Interruption Loan Scheme would allow any profitable company with a turnover of up to £ 45 million to access up to £ 5 million in government-sponsored funding. The government pledged to cover interest rates and any business loan expenses for up to twelve months.

The new lending scheme Covid Corporate Financing Facility offers a simple and cost-effective way through buying short-term corporate debt – known as commercial paper – to help collect working capital for firms that are fundamentally strong but are currently facing significant cashflow chaos. It would allowing firms across a variety of industries to pay salaries and suppliers. But it comes at a condition that the company willing to use the scheme must be able to demonstrate their sound financial health and should not have issued commercial paper before.

It means that the facility is available to businesses who can show that they were in good financial health before the shock, enabling the government to look at temporary impacts from the shock itself on the balance sheets of businesses and cash flows.

Further, the government also launched the information campaign across the different media platforms to ensure that the businesses are aware of the support available to them and the method of accessing it.

Support from Department of International trade for global businesses

It has been reported that the Department of International Trade (DIT) will help companies by assisting customs authorities in ensuring smooth clearance of their goods, as well as offering guidance on intellectual property and other business continuity issues. If coronavirus (COVID-19) has affected the supply chain of a business, the DIT will help them find alternate suppliers or a new supply chain mechanism.

UK Export Finance (UKEF) is partnering with banks and insurance firms to support companies of all sizes fulfil their export agreements and also get them compensated for. It offers government-led incentives, loans, and insurance that can protect UK exporters facing delay in payments or restrictions on transits. UKEF would also facilitate overseas buyers’ financing through the Direct Loan Facility scheme so they can continue to purchase goods and services. UKEF has more than £ 4bn of capacity to support UK companies exporting to China, as well as substantial capacity in other coronavirus-affected markets (COVID-19) to help mitigate these threats.

Coronavirus Job Retention Scheme

Rishi Sunak, while announcing his bailout package said that the government will announce a plan to support employees and make sure their wages will be secured. In this regard, HM Revenue and Customs (HMRC) department issued certain guidelines as to how employers can claim their employee’s wages through the Job Retention Scheme.

Government’s Coronavirus Job Retention Scheme is reportedly open to all British companies for the period of minimum three months starting from 1 March 2020. It is intended to help those businesses and employers whose firms have been impacted by the pandemic significantly.

As a part of this scheme, businesses, charities, recruitment agencies and public authorities can use a portal to demand 80 per cent of the furloughed (workers on a leave of absence) workers’ regular monthly wage costs, up to £ 2,500 a month, plus the related Workplace Social Insurance contributions and minimum compulsory enrolment workplace pension contributions on that income. The government allows employers to use that scheme at any time in this difficult phase.

This has also been stated that the government wants many public sector organisations not to use the scheme's services as majority of public sector workers are intending to provide critical public services or contributing in response to the coronavirus outbreaks. Where employers continue to receive government funding for payroll costs and assistance, the HMRC also wants employers to use that money to continue paying employees in regular fashion – and not furlough them out accordingly. This also extends to workers in the non-profit sector who receive support from the state for staffing expenses. Moreover, organizations receiving specific federal funding for the provision of the resources required to respond to COVID-19 are not allowed to furlough workers.

The other stimulus and support measures that have been announced by the government of the United Kingdom (UK) include the following:

• Deferring VAT and Self-Assessment payments
• A Self-employment Income Support Scheme
• A Statutory Sick Pay relief package for small and medium sized businesses (SMEs)
• A 12-month business rates holiday for all retail, hospitality, leisure and nursery businesses in England
• Small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief
• Grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000
• The Coronavirus Business Interruption Loan Scheme offering loans of up to £5 million for SMEs through the British Business Bank
• A new lending facility from the Bank of England to help support liquidity among larger firms, helping them bridge coronavirus disruption to their cash flows through loans
• The HMRC Time To Pay Scheme

The government has also separately announced help for companies who are paying sick pay to their employees who are not able to work during this period. This will be done in the form of a refund in the future, and the eligibility criteria to participate in the scheme would include the following:

• this refund will cover up to 2 weeks’ Statutory Sick Pay (SSP) per eligible employee who has been off work because of COVID-19
• employers with fewer than 250 employees will be eligible - the size of an employer will be determined by the number of people they employed as of 28 February 2020
• employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
• employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note.

Through these schemes and bailout packages British government is offering support to all UK companies in the time of economic downturn led by coronavirus. The country has also shown some early signs of epidemic slowing and has given hopes of antibody tests to be ready soon. However, the uncertainty about lockdown extending to six months continue to exist.

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