Covid-19: What did Rishi Sunak announce in the summer economic budget?

Chancellor Rishi Sunak made a number of economic announcements in parliament today, with a focus on making sure young people have the best possible chance of getting a job in the coming months.

He said it was the government’s ambition to “protect, support and create jobs”. And while the mini budget touched on green energy, homeowners and hospitality, the main message was about managing the unemployment crisis that the UK is about to face as we approach a global recession.

Sunak said the UK economy had contracted 25% due to coronavirus, which was the same amount it grew in the previous 18 years.

The big announcements

  • Jobs retention bonus – Any employer who takes their workers off the furlough scheme and employs them until at least January 2021 will receive a £1,000 bonus per employee from the government.
  • Kickstart scheme – For those aged 16-24 who are on universal credit and deemed to be at risk of long-term unemployment, a £2 billion fund has been established to create hundreds of thousands of six-month work placements. This money will cover the cost of the national living wage for employers who create these roles.
  • Traineeships – An additional £111 million will be made available to fund traineeships, with the government providing employers with £1,000 for every trainee they give work experience to.
  • Apprenticeships – The government will pay £2,000 to employers in England for each new apprentice they hire aged under 25, and a £1,500 payment for each new apprentice they hire aged 25 and over, from 1 August 2020 to 31 January 2021.
  • National Careers Service – Sunak also pledged to provide an additional £32 million over the next two years to ensure an extra 269,000 more people in England can receive personalised advice on training and work.

What else?

The second half of Sunak’s statement was focused on stimulating the economy and trying to encourage consumers to go out and spend money after months of lockdown. While no announcements were made specifically for the retail industry a number of measures will hopefully increase consumer confidence and have a knock-on effect across the high street.

  • Green energy: The government is providing a £2 billion package to help homeowners and landlords to make their homes more energy efficient in 2020/21. Under the scheme, £2 will be given for every £1 they spend to be more energy efficient, up to £5,000 per household. According to Sunak, this initiative could support 100,000 green jobs. A further £1 billion will be invested to improve the energy efficiency of public sector buildings.
  • Homeowners: Changes to stamp duty will see a temporary cut on properties below £500,000 until 31 March.
  • Hospitality: The hospitality industry will see a drop in VAT from 20% to 5%, while every UK citizen will receive a 50% reduction up to £10 per head, on sit-down meals and non-alcoholic drinks Monday-Wednesday during August in participating restaurants.

“We will not be defined by this crisis, but by our response to it,” said Sunak.

“It is an unambiguous choice to make this moment meaningful for our country in a way that transcends the frustration and loss of recent months. It is a plan to turn our national recovery into millions of stories of personal renewal.”

What about retail?

While today’s min budget represented £30 billion in economic measures to help counter the impact of a looming recession, Catherine Shuttleworth, CEO and founder of Savvy points out the lack of help for the retail sector.

“The Eat Out to Help Out scheme will stimulate some demand and get us back into the hospitality sector but it has the risk of being a one off and won’t lead to a sustained behavioural change. The fact is we have got used to not eating out as a nation and there is still a high level of concern about doing things that aren’t vital or necessary whilst Covid remains a threat.”

She continued: “The chancellor's £1k return to work bonus for employers will be positive in [retail and hospitality], but I believe will be used cautiously. The reality of the collapse in the high street will be such that by October, when the furlough scheme ends, it will be the start of the golden quarter which is a time when, traditionally, retail recruitment picks up. I imagine in the short term some retailers will use it but post-Christmas they may have no choice than to let these workers go.”

The British Independent Retailers Association (Bira) was among the industry bodies that expressed its disappointment the measures did not directly help the retail sector.

Andrew Goodacre, CEO at Bira, said: "We welcome the various initiatives to bring younger people into work and the support for the hospitality sector. However, it is disappointing that there is no VAT cut for retailers in general and no changes to national insurance. There needs to be thought given to how consumer demand is stimulated on the high street or many businesses will close and jobs lost."

Helen Dickinson, chief executive of the British Retail Consortium, agreed that the government missed an opportunity to extend relief to the retail sector.

She said: “We welcome the chancellor’s huge support for employment and training in the UK as the economy emerges from the coronavirus pandemic. Any interventions that aim to protect jobs and incomes are vital to households around the country. Time will tell if such measures can also bolster consumer demand, which remains well below pre-crisis levels, and the Chancellor must be ready to take further actions if necessary.”

Jace Tyrrell, chief executive at New West End Company, added: We need to ensure that retail and hospitality businesses can run viably throughout the summer and beyond. Measures including extending Sunday trading hours in International Centres and extending tax-free shopping to EU citizens post Brexit will boost sales and sustain footfall of local shoppers, then domestic and overseas visitors, and ensure that our businesses can survive through the summer months.”