The UK Economy has shrunk 25% in the past two months; this is how much the economy had grown for the past 18 years. In the aim to subdue continuing negative economic effects, the Chancellor Rishi Sunak has announced the summer economic update in a promising bid to stimulate the economy. These are the key points:
Incentives to retain furloughed staff
The furlough scheme will wind down by the end of October, but the jobs retention bonus will fill its absence. Businesses will be paid £1,000 for every furloughed staff an employer retains until the end of January 2021, applying to workers earning over £520 per month.
Sixth-month VAT cut
Value added tax will be cut from 20% to 5% from 13th July to 12th January 2021 for the tourism and hospitality industry. This will include restaurants, hotels and attractions (such as theme parks and cinemas). This £4bn catalyst will purportedly benefit more than 150,000 businesses and consumers.
In a similar effort, the stamp duty threshold is raised on all home purchases from £125,000 to £500,000 until the end of March 2021. This would mean that almost 9/10 transactions would be tax-free as a result.
The ‘eat out to help out’ plan
During the month of August, there will be a 50% discount for meal and non-alcoholic drinks in cafes and restaurants. Although applying only on Monday, Tuesdays and Wednesdays and limiting discount up to £10 per diner, this purports to be a promising boost, supporting the 1.8 million jobs in the that industry.
Support for young workers
The ‘Kickstart scheme’ promises a £2bn fund to pay for six-month work placements for 16-24-year-olds on universal. Sunak says there will be no cap on the number of places available.
Likewise, apprenticeships will be supported by bonuses for companies with the government offering a payment of £2,000 for each apprentice they take on under 25 and £1,500 otherwise.
In all, such unprecedented injections into the economy will undoubtedly help to stimulate the economy; retaining jobs and keeping the flow of money. With measures such as VAT cuts for leisure activities, a restaurant voucher scheme and the jobs retention scheme, there is hope that a complete economic disaster will be avoided.
Further details can be found in the Government website.