Chancellor’s Summer Economic Update – Wednesday 8 July 2020


government

As the UK enters the second phase in its recovery, Rishi Sunak’s plan focusses on job retention, job creation for young people, boosting consumer demand for the hospitality sector and green recovery.

Job Retention Bonus

The government is introducing a one-off bonus of £1000 for each furloughed employee still employed as of 31 January 2021. Employees must earn above the Lower Earnings Limit (£520 per month) on average between the end of the Coronavirus Job Retention Scheme and the end of January 2021. Further details will be announced at the end of July.

Job Creation

The government’s policy decisions focus on job creation for young people. These include:

  • A new Kickstart Scheme to subsidise jobs for young people aged 16-24 claiming Universal Credit and at risk of long term unemployment. The scheme provides a six-month job placement at National Minimum Wage for 25 hours a week. Employers will be able to top up this wage.
  • Apprenticeships: Businesses will be given £2,000 for each new apprentice they hire under the age of 25. This is in addition to the existing £1,000 payment the Government already provides for new 16-18-year-old apprentices and those aged under 25 with an Education, Health and Care Plan
  • The government intends to triple the scale of traineeships in 2020-21 with a £111 million into traineeships. For the first time ever, the government will fund employers who provide trainees with work experience, at a rate of £1000 per trainee.
  • An extra £32 million will be invested in the National Careers Service over the next two years. It is estimated that this will allow 269,000 more people in England to receive personalised advice on training and working.
  • Expansion of the Work and Health Programme: The government will provide up to £95 million this year to expand the scope of the Work and Health Programme to introduce additional voluntary support in the autumn for those on benefits that have been unemployed for more than 3 months.
  • Job finding support service: The government will provide £40 million to fund private sector capacity to introduce a job finding support service in Great Britain in the autumn. This online, one-to-one service is intended to help those who have been unemployed for less than three months increase their chances of finding employment.

The government is also increasing funding for high value Level 2 and 4 courses for school and college leavers, doubling the number of work coaches in Jobcentre Plus, increasing the funding for the Flexible Support Fund, including providing travel expenses for attending interviews and tripling the number of sector-based work academy placements.

Hospitality Sector

Eat Out to Help Out: In an attempt to boost consumer demand, the scheme will provide a 50% reduction for sit-down meals in cafes, restaurants and pubs across the UK from Monday to Wednesday every week throughout August 2020.

VAT cuts from 15 July 2020 to 12 January 2021:

  • Temporary VAT cut for food and non-alcoholic drinks. The reduced (5%) rate of VAT will apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises across the UK.
  • Temporary VAT cut for accommodation and attractions. The reduced (5%) rate of VAT will apply to supplies of accommodation and admission to attractions across the UK

Green Recovery

  • £3 billion green investment package that could help support around 140,000 green jobs and upgrade buildings and reduce emissions
    • £2 billion towards a Green Homes Grant for homeowners and landowners to pay for green improvements such as loft, wall and floor insulation
    •  £1 billion towards making public buildings, including schools and hospitals, greener, helping the country meet its ambitions of achieving Net Zero by 2050
  • Public Sector Decarbonisation Scheme offers grants to public sector bodies, including schools and hospitals, to fund both energy efficiency and low carbon heat upgrades
  • Green Jobs Challenge Fund: The government will invest up to £40 million for environmental charities and public authorities to create and protect 5,000 jobs in England. The jobs will involve improving the natural environment, including planting trees, restoring habitats, clearing waterways, and creating green space for people and wildlife.
  • Direct Air Capture: The government will provide £100 million of new funding for
  • researching and developing Direct Air Capture, a new clean technology which captures CO2 from the air
  • Automotive Transformation Fund: £10 million of funding available immediately
  • for the first wave of innovative R&D projects to scale up manufacturing of the latest technology in batteries, motors, electronics and fuel cells
  • Office for Talent: The government will create a new Office for Talent based in No.10, with delivery teams across government departments. The Office will focus on attracting, retaining and developing top research and science talent across the UK and internationally

Construction

£5.8 billion will be spent on shovel-ready construction projects including on” local projects to boost local economic recovery in the places that need it most.” The other projects include hospital maintenance and upgrades, local roads network, rebuilding schools in the worst condition in England, and court maintenance.T

The government is also introducing a temporary increase to the Nil Rate Band of Residential SDLT (Stamp Duty) from £125,000 to £500,000 until 31 March 2021. It estimates that this will mean nearly 9 out of 10 people getting on or moving up the property ladder in England and Northern Ireland will pay no Stamp Duty at all.

Construction Talent Retention Scheme to support the redeployment of workers at risk of redundancy. This will help retain construction skills and match talented workers to opportunities across the UK.

Andrew Dakers, CEO of West London Business, said: “The chancellor’s latest intervention is welcomed by West London business leaders and employees.  There are significant opportunities for local businesses to access this range of support.  For example, the £3bn for Green Homes could see £100m+ invested in our housing stock and support for over 3000 green jobs in West London.   However we believe the chancellor is going to need to continue his dialogue with the business community to ensure that a sensible approach to phasing out the furloughing scheme in the hardest hit sectors is adopted – and that aviation communities up and down the UK, including around Heathrow, get the targeted support we need.”

Maureen Penfold, Managing Partner, Moore Kingston Smith, commenting on the Kickstart scheme said: “The small print relating to this new scheme contained a number of restrictions which were not apparent from the Chancellor’s speech. Nevertheless, this scheme will undoubtedly help some of those in society who would otherwise be hardest hit from the economic fall-out of the pandemic.”

Oliver Knight, Head of Residential Development Research at Knight Frank, commented on stamp duty announcement: “Today’s announcement will provide a welcome boost to property transactions across the market and comes at a time when activity levels and interest have already started to recover following the two-month market shut down. Clearly, the Chancellor recognises the multiplier effect that moving house can have on the UK economy with more money spent on DIY projects and renovations. However, while a temporary holiday will bring forward housing market and economic activity, as well as helping to address affordability concerns surrounding the up-front cost of moving, a wider re-think of property taxes is still needed to reduce the distortive effect SDLT has on property markets and maximise any stimulus the government plans to provide to the UK economy.”