Authorities release new COVID-19 support

The chancellor’s latest measures to sure up a financial sector hit by the Coronavirus outbreak have been welcomed by the tech sector.

Rishi Sunak announced a further package of measures for the self-employed, now mirroring the scheme for the employed workforce.

The new Self Employed Income Support Scheme will be worth up to £2,500 per month for three months and will be paid in a single lump sum in June, or earlier if the government can establish the process sooner.

Gerard Grech, chief executive at Tech Nation, stated: “This will be the most high-tech response to a pandemic in human history – UK tech will have a key role to play globally, with the potential to save lives and to connect people in ways we may never have expected.”

Of the 2.93 million tech sector workers in the UK, the self-employed are a key part of the tech ecosystem. Being able to tap into freelance user experience design or software programmer talent, for example, enables the continued growth of the industry, pointed out Grech.

“The new scheme will therefore be welcomed by the tech sector’s self-employed workforce, with a taxable grant worth 80 per cent of average profits over the past three years, and according to the Treasury, benefitting 95 per cent of the UK’s self employed.”

Yesterday, the chancellor, along with the governor of the Bank of England Andrew Bailey, and the interim chief executive of the Financial Conduct Authority Chris Woolard wrote a joint letter to the chief executives of UK banks urging them to keep lending to viable businesses to support the economy throughout the COVID-19 crisis.

It called on lenders to also support UK companies not covered by the two new state-backed loan schemes, the Coronavirus Business Interruption Loan Scheme (CBILS) and the Covid Corporate Financing Facility (CCFF).

New measures include a £330 billion loan guarantee scheme to help small and medium-sized businesses borrow up to £5 million, and a corporate financing scheme to buy up commercial debt.

Regulators have also taken steps to reduce pressure on lenders during the crisis, including reducing the countercyclical capital buffer to zero per cent and delaying the implementation of new capital rules.

Tech Nation surveyed over 100 tech bosses and founders, finding that 57 per cent plan to access CBILS, and 78 per cent plan to access the job retention scheme.

Looking at this in more detail however, 58 per cent of startups do not intend to access either scheme, compared to 72 per cent of scaleups intending to access either or both of the schemes, showing a variation of approach between differently sized companies.

A scaleup is categorised as a tech company with 10 or more employees and 20 per cent year-on-year growth.

The CBILS scheme will not meet a key section of urgent need in the tech sector, according to Tech Nation, as many are finding that not yet being profitable or lacking assets to provide suitable security is restricting access to government schemes. In addition, venture capital backing may restrict the option to take on debt finance.

Grech laid out five policy recommendations to help the sector:

• Liquidity to pre-revenue early stage startups - funds to support innovative tech startups that are pre-profit to carry them over the next three to six months. Convertible loans invested by the government could be made into over 1,000 companies across the UK.
• Co-working spaces for tech companies and self-employed - some co-working spaces fail to qualify for small business rate relief - these could be temporarily reclassified as hospitality. Small scale startups operating large spaces don’t qualify for rate relief at present because of the land area of the business, so this change would provide useful temporary relief for co-working spaces across the country.
• Talent – 38 per cent of companies were concerned about staff retention due to cash flow. A National Insurance or Pay As You Earn deferral could be introduced to enable companies to manage cash flow and staff.
• Visas - Tier 2 Visas holders who are let go could have their visas extended for 18 months regardless of employment status.
• Research & Development - Artificial intelligence companies working on breakthrough tech need funding. Accelerating R&D tax credits could help credit availability.

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