Will Chancellor Rishi Sunak extend furlough and SEISS?
- UK Chancellor Rishi Sunak could move the stamp duty holiday deadline to June 2021
- The furlough scheme is expected to be extended beyond April
- Self-employed workers anticipating up to GBP 7,500 in grants
- Pound Sterling (GBP) maintains bullish momentum against US dollar (USD) and euro (EUR)
Chancellor Rishi Sunak will deliver his Spring Budget on March 3rd, outlining a plan to return the UK’s public finances to a more sustainable footing while supporting businesses and individuals.
The Budget is expected to include support measures and tax policies that coincide with the UK governments “Build Back Better” mantra, which aims to unlock investment, level up infrastructure and improve access to jobs and opportunities.
However, the Chancellor has a formidable task ahead of him, given that the national debt sits at GBP 2.11TN. What can we expect from Mr Sunak in the upcoming Budget, and what are industry leaders urging him to do?
Stamp duty holiday deadline could be moved to June
According to the Times, Chancellor Rishi Sunak could extend the stamp duty holiday’s deadline until June-end to prevent a completion chaos frenzy.
Last year, Mr Sunak said he would temporarily raise the stamp duty threshold on UK property from GBP 125,000 to GBP 500,000 to spur activity in the housing market amid the pandemic.
However, only buyers who completed property transactions before March 31st would be exempt from the stamp duty fee.
The March deadline has left many buyers scrambling to get their property transactions across the line to avoid paying up to GBP 15,000 in Stamp Duty Land Tax (SDLT).
Real estate agents and industry leaders have urged the Chancellor to extend the deadline or taper the stamp duty holiday to prevent a collapse in sale following comments from buyers who said having to pay the levy would force them to pull out of transactions.
According to the Times, Rishi Sunak will use his Budget to extend the stamp duty holiday deadline to June at the cost of approximately GBP 1BN.
However, the UK economy could benefit from the tax break as vigorous activity in the property market is likely to have broader economic advantages and contribute to growth.
Paul Broadhead, Head of Mortgages and Housing at the BSA, said the economy would benefit “as new homeowners increase their spending on furniture, appliances and ancillary services such as removal companies, cleaners and decorators. The Chancellor will also have reaped some reward through the associated VAT payments.”
Rishi Sunak is also set to extend the furlough scheme in his Budget announcement at the cost of GBP 4BN a month.
The furlough scheme could be extended beyond April
UK Prime Minister Boris Johnson hinted that the Coronavirus Job Retention Scheme (CJRS), commonly referred to as the furlough scheme, would be extended beyond April to continue support businesses and protect jobs while lockdown restrictions remain in place.
Official sources suggest the furlough scheme’s deadline could be pushed back to the end of May to provide UK firms with a fighting chance to restart as the economy reopens.
According to the Times, the Chancellor will also extend business rates holidays for worst-hit sectors such as hospitality, retail and leisure at GBP 1BN a month and extend the VAT cut for the hospitality and tourism sectors until June.
However, given that all legal limitations on social contact are expected to be abolished on June 21st, the Chancellor could introduce a measure akin to the Job Retention Bonus (JRB) scheme, which he previously withdrew in August 2020.
Although critics raised concerns over the effectiveness of JRB, offering UK companies one-off bonuses for reinstating furloughed workers could help preserve jobs.
Millions of self-employed workers are also anticipating grants worth up to GBP 7,500 in Rishi Sunak’s Budget.
Chancellor to distribute GBP 7,500 in grants to self-employed workers
Self-employed workers stand to benefit from GBP 7,500 grants covering the February to April period, as many businesses are likely to remain closed during that time due to ongoing coronavirus lockdown restrictions.
The Treasurer is yet to announce the grants, which are expected to run through the Self-Employment Income Support Scheme (SEISS). Still, we understand that people who meet the eligibility criteria can claim up to 80% of average monthly profits capped at GBP 2,500.
However, the Chancellor is believed to be considering axing SEISS in May or lowering the grant claims’ threshold to 20% of average monthly profits in exchange for more targeted support measures.
Association of Independent Professionals and the Self-Employed (IPSE) Policy Director, Andy Chamberlain, welcomed the proposed terms for the SEISS grants but warned the Chancellor against scrapping self-employment support too early.
Mr Chamberlain said that while the current lockdown is in place, the “UK government must ensure there is proportionate support for this country’s freelancers and self-employed.”
While comprehensive details of Rishi Sunak’s Budget remain unknown, it’s unlikely that the Chancellor will tighten policy measures following UK Prime Minister Boris Johnson’s ambitious plans to reopen the economy by June.
Although Mr Johnson’s exit strategy will follow a cautious approach, the proposal has boosted confidence over the country’s recovery outlook, which in turn is driving pound Sterling (GBP) exchange rates higher.
Pound Sterling extends winning streak in FX markets
The British pound (GBP) continues its march higher against the euro (EUR), US dollar (USD) and other major currencies in mid-week trade, benefitting from risk appetite and optimism over the UK’s recovery outlook.
The British pound to US dollar (GBP/USD) exchange rate rallied to USD 1.4233 in overnight trade and remains well-supported during the European session at USD 1.4147.
Meanwhile, the British pound to euro (GBP/EUR) exchange rate hit its highest levels since March 2020 on Wednesday. GBP/EUR surged to EUR 1.1704 earlier during the session before correcting to EUR 1.1625.
Although UK economic data and reports of COVID-19 mutations pose a threat to Sterling’s (GBP) outperformance, Britain’s predicted sustained economic recovery should drive GBP higher in foreign exchange (FX) markets over the coming weeks.