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Tackling the financial impact of the Coronavirus

By Ensors Team
17th Mar 2020

Since the first cases were reported in China in late December 2019, Covid-19 has developed quickly into a global pandemic.  According to the World Health Organisation, there have been more than 169k confirmed cases worldwide, and at least 6.5k fatalities, in just under 11 weeks.  These figures include almost 1.4k confirmed cases in the UK, and 35 fatalities, at the time of writing.

Aside from the serious health consequences being faced, there is a fundamental issue of people and businesses not being able to function because of the measures necessary to contain the virus, which in turn has led to a sharp slowdown in economic activity around the world.

The Bank of England (BoE) have advised that they expect UK economic activity to ‘weaken materially’ during the outbreak, and Rishi Sunak’s first budget set-out the Government’s response to the issues faced by the UK.

Aside from assurances that the NHS would receive extra resources (‘whatever it costs’) to tackle the healthcare implications of the virus, the Chancellor acknowledged that businesses would also need a ‘financial plaster’ to help survive the economic disruption associated with the crisis and, in turn, maintain the employment of millions of people.

Small and medium-sized businesses, in particular, are likely to be hit by a combination of trading difficulties, a slump in demand and staff absence.  A key issue is going to be cash flow and as activity inevitably slows business will have to do everything they can to retain cash and this will likely involve businesses taking longer than normal to pay suppliers.

On the morning of the Budget, the BoE announced a package of measures to support the economy, including an emergency cut in interest rates to just 0.25%, a new £100bn scheme to help households and businesses benefit from the reduction in interest rates, and other changes which would free up an additional £190bn for banks to lend.

The Budget went on to introduce a £30bn package to help businesses and individuals during the outbreak.  This included support for businesses by way of a ‘scaled-up’ Time to Pay scheme, a new Coronavirus Business Interruption Loan Scheme which would see loans of up to £1.2m supported by an 80% Government guarantee, and SSP refunds for SMEs.  It was also announced that businesses within the retail, leisure and hospitality sectors (which had already experienced a downturn in consumer confidence) would qualify for a 12-month Business Rates holiday (where premises had a rateable value below £51k), and any business eligible for SME Rates Relief would be eligible for a £3k grant.

The timing of the BoE and Treasury’s actions were clearly co-ordinated to maximise their effect.

Whilst the Government believe that disruption from outbreak is likely to be temporary, the measures have been designed to help to keep firms in business and people in jobs and help prevent this temporary disruption from causing longer-lasting economic harm.  However, there is no doubt that the impact of the virus will cause grave trading difficulties for some businesses and there may well be casualties.

We have spoken to a number of Banks and lenders who have confirmed that they are keen to help their customers during this time and the key thing in these unprecedented times is communication.

Nobody is going to want to see businesses fail due to coronavirus and our approach is that a collaborative and open approach to the issues being faced will be paramount and we are well placed to provide the advice and assistance that will be required.  We will continue to support funders and businesses in reaching a positive outcome and, as always, if you have any issues or concerns, we will be pleased to talk to you and discuss the issues that need to be addressed and find the required solutions.