On Sunday evening, the Prime Minister addressed the nation to begin to detail how the initial phase of easing the lockdown will commence. This was followed up by a more detailed narrative released to Parliament on Monday afternoon.
It is clear that not all sectors will be able to return to work at the same time and this adds to the huge amount of economic uncertainty ahead for the remainder of this year and into 2021 as different sectors and businesses will continue to be impacted by the COVID virus in a variety of ways.
Current guidance from the government is that if your employees can work from home they should continue to do so. However, from Wednesday of this week, employees who aren’t able to work from home have been encouraged to engage with their employers about going back to work where it is safe to do so. This relies on employers making the workplace safe and meeting HMRC guidelines on, for example, shift patterns, social distancing and hygiene.
Some sectors are however legally required to remain closed, including some shops, bars, pubs, gyms, hairdressers and leisure facilities.
The gradual easing of the lockdown may present opportunities, but may also be a challenge that needs detailed financial planning to navigate.
In most cases, the furlough scheme, HMRC deferrals of PAYE/VAT and the loan schemes have given businesses the necessary liquidity and working capital to survive until the end of June. However, we expect that the current furlough scheme will be amended from July with it being tapered down to either a lower level or to become sector specific. The fact that the government are encouraging employees to return to work would suggest that they do not expect the furlough scheme to remain in its current guise beyond the end of June.
Further details with regards to the future of the furlough scheme are expected to be announced later this week.
As people return to work and government support is eased additional long-term funding may be required to assist with the virus impact, which could spread the cost of the virus into 2022 and beyond.
We have helped clients achieve significant funding through government schemes to date. Good financial modelling helps to identify cash flow gaps that may exist in the next couple of years and may not currently be foreseen due to the uncertainty in the economic environment. We have experience of preparing detailed financial models and, in our opinion, a detailed financial model will be essential should you need to access any of the government backed lending facilities later in the year or to access new funding which may be required to support working capital as businesses grow and bounce back from the virus. If designed properly, a financial model can be easily adapted and modified as new economic factors impact the business.
Whilst we appreciate that many business owners do not wish to take on further debt in uncertain times, it should be pointed out that both the Bounce Back Loan Scheme and Coronavirus Business Interruption Loan Scheme arrangements do not carry any fees or interest in the first 12 months, and if forecasts do turn out to be more pessimistic than reality, they can be repaid without any early repayment charges.
We expect both schemes will start to wind down from September 2020 onwards and therefore we strongly recommend that business owners and senior business managers ensure a robust business model is in place over the next few months to assess whether there is a need to make an application.
We are happy to assist you in preparing a business model or in any other way we can during this uncertain and challenging time so please do not hesitate to get in touch with your usual RPG contact if you would like to discuss these issues further.
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