Event highlights: building in resilience and what the Winter Economy Plan means for startups

Government support like the furlough scheme have been a lifeline for startups affected by the pandemic, but as that support begins to ease many startups are having to adjust their strategy. With this in mind, we hosted a virtual event for members to help them get to grips with the latest government support available and build in resilience for the next quarter.

We were joined by Andrew Roughan, managing director at Plexal, and our member Ben Greenstone, director at the Taso Advisory – a consultancy that advises businesses on public affairs and policy. Here are some of the takeaways from our event if you missed it.

 

What we know about the Winter Economy Plan

 

  1. The furlough scheme will be ending. The chancellor said: “I cannot save every business, I cannot save every job”.
  2. A new Jobs Support Scheme was announced, which will directly support wages of people in work. For businesses with depressed demand they can keep people in a job on shorter hours without making them redundant. To claim this, people must work one third of their normal hours and be paid a third of their normal wages by their employer. The government and the employer will then pay the remaining two thirds evenly between them. All SMEs will be eligible for this. Large businesses will only be eligible if their turnover has fallen during COVID-19. It’s also open to businesses regardless of whether they used furlough support or not. The scheme will be open for six months and will start in November 2020.
  3. Businesses will be able to claim both the Jobs Support Scheme and the Jobs Retention Bonus.
  4. The Self Employed Grant Scheme is being extended on similar terms to the Jobs Support Scheme.
  5. Businesses with Bounceback Loans will now be able to apply to “pay as you grow”. This allows loans to be extended for between 6-10 years (the chancellor says this nearly halves monthly payments). Businesses can also apply to make interest-only payments or suspend all payments for up to six months. Taking up any of these options will have no impact on your credit rating.
  6. The government guarantee on Coronavirus Business Interruption Loans will be extended for up to 10 years to allow lenders to give people more time to pay.
  7. The deadline for loan applications has been extended to the end of this year, and the government is working on a successor loan programme.
  8. For businesses that deferred VAT payments, the government is allowing businesses to pay in 11 monthly instalments rather than everything in March.
  9. For self-assessment tax, individuals may pay in 12 monthly instalments from January rather than all at once.
  10. The rate of VAT for hospitality and tourism will remain at 5% (instead of the standard 20%) until March 2021.

 

 

What startups should do now

 

Andrew Roughan, managing director, Plexal

Andrew underlined just how disruptive an event COVID is and will be: “Major moments of disruption in history have also caused massive booms later for opportunists. The Great Fire of London caused London to change shape and size, while the Spanish flu in 1918 made governments think differently about health inequality. COVID is another one of these moments that will fundamentally transform marketplaces, and there are opportunities for those that can adapt.”

But he said that while it’s important to act with prudence and caution, fortune favours the brave: “Businesses that go into hibernation now will find it hard to emerge on the other side of the crisis. Companies should be considering what levers are available to them not just from the government but in their networks. They really need to be thinking hard about how the crisis is affecting their particular marketplace now and in the future. At Plexal, for example, we’re considering what commuting patterns will look like and seeking to understand government policy in areas that affect us.”

 

What other support can startups expect?

 

Ben predicts that businesses may have more support to look forward to: “My view on the Job Support Scheme is that is doesn’t go far enough. It’s a pretty unattractive deal for most business and I expect that the chancellor will have to come back soon to make that scheme more attractive.”

Ben also advises startups to explore going for government contracts if they haven’t already: “The government has a stated aim of spending roughly 1/3 of procurement on SMEs, so if you have a service government might need, whether it’s cybersecurity protection or accountancy software, that can be an avenue worth actively searching for opportunities. It’s also important to understand what government policy will look like in the future and make sure your licence to operate won’t be under threat.”

Andrew agreed, and told our members that there’s an opportunity for smaller startups and SMEs to access contracts open to larger organisations by building relationships with them. He also said that Plexal is willing and able to play a role in building a bridge between organisations large and small with this goal in mind.

However, when it comes to the investment landscape, Andrew shared a word of caution for early-stage startups. Referring to the data from our startup tracker, he said startups may find it hard to secure funding from investors if they haven’t been through a round already. “With investors shoring up existing portfolios there is a significant concern for early-stage companies. They should have a heightened awareness about cashflow management and be able to manage with or without new equity.”

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