2020 Budget Impact on SMEs and the FX market
Chancellor Sunak’s Budget announcement had minimal impact on GBP, following the Bank of England’s emergency rate cut during the morning of 11th March 2020 as an attempt to strengthen the economy amid the coronavirus outbreak.
After the Bank of England announced their interest rate cut from 0.75% to 0.25%, sterling fell to lows against both the euro and dollar. However, these loses were short lived and GBP was back on firm ground soon after.
The Bank of England’s wild card played a helping hand ensuring that Sunak’s first Budget announcement had little influence over the FX market – it had already addressed one of the main and anticipated points he was expected to raise; the response to the economic crisis caused by Covid-19.
So, what does the Budget Announcement mean for small businesses?
Despite GBP remaining somewhat stable during what was deemed to be a key economic event for the UK in 2020, it’s been said that the economy will grow at the slowest rate since 2009. Here are the issues raised in the 2020 budget that may be of interest to SMEs and business owners:
Sunak has introduced a further £12billion stimulus to help the economy through the coronavirus. Statutory sick pay must be paid to staff that have been advised to self-isolate, starting from the first day. However, companies with less than 250 staff can be refunded for these payments for two weeks. Small businesses can also access ‘business interruption’ loans up to the value of £1.2m.
Corporation tax remains at 19%, aligning with the Conservative Party manifesto, which has reversed previous cut plans. There’s been a rise in the National Insurance threshold from £8,632 to £9,500 and Entrepreneurs’ Relief is set to be retained, but reduced to a £1million life allowance from the previous £10million. Whilst ‘fuel duty’ will remain frozen, tax relief on fuel used in the construction industry is to be abolished.
Imports, exports and manufacturing
The key takeaways of the 2020 Budget for the manufacturing industry is the introduction of plastic packaging tax from April 2020. Furthermore, companies that manufacture and/or import products containing less than 30% recyclable material will be fined £200 for every tonne.
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For more information about the outcomes of the 2020 budget, click here
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