Covid-19 Economic Stimulus Measures: Too Much of a Good Thing?

Insights / / Covid-19 Economic Stimulus Measures: Too Much of a Good Thing?

Over the past weeks, the UK has witnessed an unprecedented governmental response to counteract the impact of COVID-19 on the economy, from the furloughing scheme, which has now been extended to October, to the ever-expanding government-backed debt financing options. However, concern is mounting over the viability of debt financing as a solution in light of the scale of the challenge that business is confronted with. Last week saw growing discussion of the need for government intervention to support equity financing or other solutions to ensure the viability of businesses going forward.

March 2020 saw a 5.8% fall in GDP, the steepest monthly drop on record, and the hoped for V-shaped recession is looking less likely according to various economic forecasters. The economy is in it for the long haul, necessitating sustainable long-term solutions beyond the government-backed debt financing schemes, to ensure businesses are not only able to survive in the short term, but to return to a competitive state with balance sheets which support growth. As such, various alternatives have been mooted, including support to increase the availability of equity financing for businesses (see a summary letter from TheCityUK to the Bank of England on this here), to establishing a state run ‘bad bank’, creating a recapitalisation fund allowing the state to provide debt which could be swapped to equity at a later point.

While we await developments on equity financing solutions and the government’s appetite to take equity interests in bailed out businesses, the government continues to help businesses weather the storm. A key example this week being a government guarantee for trade credit insurance, in a dramatic bid to protect supply chains. This Q&A details that and other updates in UK government policy response since we published our previous Q&A on 11 May 2020.

You can check the latest government guidance for businesses, employers and employees here.

You can also access our extensive guidance here, which addresses the evolving range of legal issues that you may need to consider as we all navigate this unprecedented challenge to keep our businesses trading and ourselves healthy.

What Support Measures has the Government Announced?


  • On 12 May 2020, the Chancellor extended the Coronavirus Job Retention Scheme, which will continue until the end of October. Furloughed workers across UK will continue to receive 80% of their current salary, up to £2,500. New flexibility, allowing part work/part furlough set-ups, will be introduced from August. - Link


  • Extension of the temporary suspension of wrongful trading provisions to 30 June 2020, to continue to make it easier for directors to keep trading without the threat of personal liability should the company fall into insolvency. - Link

Trade Credit Insurance

  • The government will temporarily guarantee business-to-business transactions currently supported by trade credit insurance, ensuring the majority of insurance coverage will be maintained across the market. The guarantee will provisionally last until the end of the year, when it will be reviewed. - Link

Governance & Regulatory

  • On 14 May 2020, the FCA announced a series of financial services exemptions to the forthcoming Corporate Insolvency and Governance Bill. - Link
  • Also on 14 May, the FCA confirmed a series of temporary measures to help insurance customers who may be suffering financial difficulties as a result of coronavirus. Those measures, including premium reductions, discounts, waiving fees, and payment deferrals, come into effect today and will be reviewed in the next three months. - Link

Industry-Specific Support

  • A new £600 million Infection Control Fund has been introduced to tackle the spread of COVID-19 in care homes. The fund, which is ring-fenced for social care, will be given to local authorities to ensure care homes can continue to halt the spread of coronavirus by helping them cover the costs of implementing measures to reduce transmission. - Link


  • Applications for the Self-Employment Income Support Scheme opened on 13 May 2020. Those eligible will received government grants worth up to £7,500. - Link


  • On 15 May 2020, the government agreed a £1.6 billion funding and financing package for Transport for London to protect key services, helping people to stay safe during the pandemic and supporting the capital’s gradual recovery from COVID-19. - Link

The government had previously announced the below measures covered in our previous updates, which can also be accessed here.

What Support is the Government Providing to Businesses?

Business Rates

  • Business rates revaluation postponed. A revaluation of business rates will no longer take place in 2021. Legislation had been introduced to bring the next revaluation forward by one year from 2022 to 2021, but following the recent economic impacts of the pandemic, ministers want to ensure businesses have more certainty during this difficult time. This comes on top of the government’s previous discount of almost £10 billion on businesses’ rates bill this financial year, after the business rates retail discount increased to 100% from 50% for 2020 and 2021. - Link
  • Business-rates holiday for retail, hospitality and leisure businesses in England for 2020-21 tax year and grants of £25,000 to businesses in those sectors operating in premises with a rateable value between £15,000 and £51,000. You do not need to do anything; your local authority will inform you if either of these measures apply to you. - Link
  • Business-rates holiday for nurseries in England for the 2020-21 tax year. You do not need to do anything; your local authority will inform you if this measure applies to you. - Link
  • Additional funding for local authorities to provide a £10,000 grant to businesses that get small business rate relief, tapered relief or rural rate relief (around 700,000 businesses could benefit). You do not need to do anything; your local authority will inform you if this measure applies to you. - Link

Consumer Debt

  • The FCA has announced a proposed package of measures to support consumers facing difficulties due to coronavirus. Proposed measures cover a possible 3-month payment freeze on motor finance repayments and a possible 1-month interest free payment freeze on high cost credit agreements. - Link
  • Myriad temporary measures to support users of consumer credit products unveiled by the FCA. These measures include ensuring that up to £500 on already-arranged overdrafts on personal current accounts is provided at 0% interest for up to three months, and payment freezes on credit cards and personal loans at a reasonable rate of interest. These measures are in force. - Link

Debt Financing

  • On 27 April 2020, the Chancellor announced the new Bounce Back Loan Scheme (BBLS) to support loans of up to £50,000 to small businesses with a 100% government-backed guarantee for lenders. The scheme takes effect today. The following letter from the Chancellor, dated 1 May 2020, to all accredited lenders under the Coronavirus Business Interruption Loan Scheme (CBILS) sets out the interest rate that Bounce Back Loans will be offered at, and outlines legislative and regulatory changes being made to support the delivery of the scheme. It also clarifies the interaction between lending under BBLS and CBILS. - Link
  • New measures to protect UK high street from aggressive rent collection and closure. Government to introduce temporary new measures to safeguard the UK high street against aggressive debt recovery actions during the coronavirus pandemic. Statutory demands and winding up petitions issued to commercial tenants to be temporarily voided and landlords and investors asked to work collaboratively with high street businesses unable to pay their bills during COVID-19 pandemic. - Link
  • On 15 April 2020, the FCA published a “Dear CEO” letter sent to the leaders of UK banks on lending to SMEs during the pandemic, focusing on the need for banks to provide support to SMEs through Coronavirus Business Interruption Loan Schemes. - Link
  • Government-backed lending facility for large companies to cope with short-term cash-flow issues. The Bank of England’s Covid Corporate Financing Facility is administered through banks and will see the Facility purchase short-term commercial paper to the value of at least £1 million from companies that make a ‘material contribution’ to the UK economy and that were in good financial health prior to the economic shock. The scheme is now available. - Link
  • Amendments to the Coronavirus Business Interruption Loan Scheme (CBILS) administered through the British Business Bank in order to relax the security requirements and increase access to the scheme’s funds. The scheme supports businesses with an annual turnover of under £45 million in eligible sectors with an 80%-government-backed loan of up to £5,000,000. It has no lending charge and the government will cover the first twelve months of interest. The scheme is available and is administered through participating banks. - Link & Helpful Ince Guidance
  • Coronavirus Large Business Interruption Loan Scheme to support UK-based businesses (subject to some sectoral restrictions) with an annual turnover of £45 million to £500 million through an 80%-government-backed loan, at a commercial rate of interest, of up to £25,000,000. Numerous products will be available through the scheme including short-term loans, overdrafts, and invoice and asset finance, and the scheme will target companies unable to secure regular commercial financing. The scheme is expected to be administered through participating banks and will launch later this month. - Link
  • PRA guidance to banks to consider waiving covenant breaches caused by COVID-19-related issues and to do so in good faith and to not impose new charges or restrictions on customers following a covenant breach that are unrelated to the facts and circumstances leading to the breach.  - Link


  • As of 20 April 2020, the Coronavirus Job Retention Scheme is up and running. The package involves the government paying up to 80% of workers’ wages, of up to £2,500 per worker per month, backdated to 1 March. It is to run until the end of June. - Link Helpful Ince Guidance
  • If your business had up to 250 employees on 28 February 2020, you may be able to reclaim up to 2 weeks of statutory sick pay and expenditure per eligible employee who has been off work due to COVID-19 (including in self isolation). The repayment mechanism is to be set up over the coming months. Furthermore, Section 40(1) Coronavirus Act 2020 has also facilitated the disapplication of Section 155(1) Social Security Contributions and Benefits Act 1992 in order that statutory sick pay is available from the first day of absence. - Link

Equity Financing

  • Package of measures from the FCA to assist companies in raising new share capital. Measures include recommending investors support issuances by companies of up to 20% of share capital, and making available dispensations from some of the requirements to hold general meetings under the Listing Rules. These measures are in force until further notice. - Link

Governance & Regulatory

  • On 7 May 2020, the Financial Services Regulatory Initiatives Forum launched a new initiative to help financial firms prepare for upcoming regulatory work - the Regulatory Initiatives Grid. The introduction of the Grid - announced by Chancellor of the Exchequer Rishi Sunak in March’s Budget - was brought forward to help firms stretched by the impact of COVID-19. The Forum is comprised of the Bank of England, Prudential Regulation Authority, Financial Conduct Authority, Payment Systems Regulator and Competition and Markets Authority, with HM Treasury attending as an observer member. The Grid lays out the planned timetable for major initiatives - including the transition from LIBOR and the introduction of financial services legislation to prepare for the end of the EU withdrawal transition period. - Link
  • The FCA has made a combined national and international response to COVID-19 (and Brexit). Find a speech on the topic, delivered by Nausicaa Delfas, Executive Director of International, at the Deloitte Annual Conduct Risk Conference (webinar), here. - Link
  • On 1 May 2020, the Chancellor made a Treasury Direction under Sections 71 and 76 of the Coronavirus Act 2020. The Direction sets out that HMRC is responsible for the payment and management of amounts to be paid under the Self-Employment Income Support Scheme, as set out in the Schedule to the Direction. It also sets out the legal framework for the Scheme. - the Direction Link & further advice Link
  • The FCA is seeking legal clarity on business interruption insurance, alongside a package of measures to help consumers and small businesses who hold insurance products and who are facing other issues as a result of the virus. - Link
  • On 2 May 2020, The Bank of England announced changes to the Term Funding Scheme with additional incentives for SMEs (TFSME) and the UK leverage ratio, in order to support HM Treasury’s Bounce Back Loans Scheme (BBLS). In addition, the PRA is confirming that banks subject to the UK leverage ratio will be able to exclude loans under the Bounce Back Loan scheme from the UK leverage ratio exposure measure. - Link
  • Announcement by the Bank of England’s PRA of relaxation of submission deadlines for harmonised and PRA-owned regulatory reporting in relation to certain documents. - Link
  • The PRA has told banks to use their liquidity and capital buffers to back customers during the COVID-19 crisis, after requiring lenders to cancel dividends to bolster their finances. Find a Q&A released today here. - Link
  • Annual general meetings to be allowed to be held online or postponed. Legislation is set to be introduced soon. - Link
  • Two-week moratorium on preliminary financial statements announced by the FCA in order that listed companies (except those on the AIM) have time to give due consideration to events before making disclosures. - Link
  • Three-month extension period to time to file accounts with Companies House. Companies will need to apply through an online system citing COVID-19 as the reason for needing an extension. - Link
  • Extra two months to publish audited annual financial reports, giving firms six months from the end of the financial year in which to do so instead of four. - Link
  • FCA and PRA dual-regulated firms given permission to allocate senior management functions to an interim senior manager who is unapproved by the FCA and PRA. - Link
  • Supervisory flexibility from the FCA on matters including anti money laundering, best execution and depreciation notifications. The FCA has written the following letter to CEOs of firms providing services to retail investors. - Link

Industry-Specific Support

  • England’s dairy farmers will be able to access up to £10,000 each to help them overcome the impact of the coronavirus outbreak. The new funding will help support dairy farmers – who together continue to produce over 40 million litres of milk every day – who have seen decreased demand for their products as bars, restaurants and cafes have had to close. - Link
  • On Monday 20 April 2020, the government confirmed that it would establish a Future Fund scheme for innovative companies, accessible from May 2020. The scheme will issue convertible loans from £125,000 to £5 million to innovative companies that are facing financing difficulties due to the coronavirus outbreak. - Link
  • Numerous relaxations of regulations for the medical sector including in relation to clinical trials, inspections, medical devices and medicines. - Link
  • £300m in advanced funding for pharmacies to support provision of essential services. Part of the funding has been paid already and part will be paid on 01.05.20. The advance will be reconciled later in the financial year. - Link
  • £397m of funding for bus service operators to keep wheels turning. Existing funding will be paid in full despite reductions in service levels, new funding is being made available over the next three months through the COVID-19 Bus Services Support Grant (with conditions attached concerning service levels), and extra funding previously earmarked for starting new services is being reallocated for distribution by local authorities to existing providers. - Link
  • Grants of up to £50,000 for technology companies who develop projects that demonstrate significant benefits to society or an industry that has been severely impacted or permanently disrupted by the pandemic. The funding is available through a competition to which entry closes on 17/04/20. - Link


  • Moratorium on debt enforcement and a new restructuring plan permitting ‘cross-class cram-down’. Legislation is set to be introduced soon. - Link & Helpful Ince Guidance
  • Suspension of wrongful trading provisions of the Insolvency Act 1986 to make it easier for directors to keep trading without the threat of personal liability should the company fall into insolvency. - Link & Helpful Ince Guidance


  • On 23 April 2020, HM Treasury (HMT) announced revision to the UK Debt Management Office’s (DMO) financing remit 2020-21 in light of support measures put in place for UK citizens. Support measures will necessarily increase the government’s financing requirements to those set out in the Budget. HMT outlined a revision to the DMO’s financing remit for 2020-21, covering May to July 2020 inclusive. The DMO also published details of the revised planned gilt issuance schedule for May to July 2020. Planned gilt sales will now total £180 billion over this three-month period based on the government’s assessment of its financing requirements. - Link


  • Support for businesses trading internationally including a Department of International Trade dedicated email address for COVID-19-related queries and information on access to existing UK Export Finance support. - Link
  • Relaxation of planning regulations to allow pubs and restaurants to provide takeaways without a planning application. This measure is set to be implemented by legislation soon. Businesses will need to inform their local authority of the beginning and end of their use of the measure. - Link & Helpful Ince Guidance


  • Ban on forfeiture of commercial tenancies for a period of more than three months, including in relation to forfeiture proceedings already underway in the High Court. This measure is implemented through Section 82 of the Coronavirus Act 2020. - Link & Helpful Ince Guidance

Small Business

  • A discretionary fund of up to £617 million has been set up to accommodate certain small businesses previously outside the scope of the business grant funds scheme (i.e. the Small Business Grants Fund (SBGF) and the Retail, Hospitality and Leisure Grants Fund (RHLGF)). This additional fund is aimed at small businesses with ongoing fixed property-related costs. As of 27 April 2020, over £7.5 billion has been paid out to over 614,000 business properties via the SBGF and RHLGF schemes. This is over 61% of the grant funding allocated to local authorities. - Link


  • Temporary changes have been made to VAT payments due between 20 March 2020 and 30 June 2020 to help businesses manage their cash flow. Taxpayers can elect to defer the payment until a later date or pay the VAT due as normal. HMRC will not charge interest or penalties on any amount deferred as a result. - Link
  • Businesses in financial distress and with outstanding tax liabilities may be eligible for support through HMRC’s ‘Time to Pay’ service, which gives extra time to pay tax in instalments agreed on a case-by-case basis. The scheme is now available and HMRC have set up a coronavirus helpline - Link
  • Deferring VAT payments for three months from 20 March 2020 to 30 June 2020. This scheme is automatically in place for all businesses and you do not need to make an application. - Link


  • On 9 May 2020, the Transport Secretary announced a £2 billion package to help the country emerge from the COVID-19 crisis, aiming to put cycling and walking at the heart of the government’s transport policy. Read more here.

What Support is the Government Providing to the Self Employed?

  • Government to cover 80% of monthly profits, derived from an average of monthly profits over the last three financial years, up to a limit of £2,500, for an initial period of three months. This support is available for self-employed people that had trading profits of less than £50,000 in 2018-19 or an average trading profit of less than £50,000 over the last three financial years and who submitted a self-assessment tax return for 2019. Those who pay themselves a salary and dividends through their own company are eligible for the Coronavirus Job Retention Scheme but not for this scheme. This scheme will be accessible before June. - Link
  • Self-employed people in financial distress and with outstanding tax liabilities may be eligible for support through HMRC’s ‘Time to Pay’ service, which gives extra time to pay tax in instalments agreed on a case-by-case basis. - Link
  • Deferring income-tax payments so that payments due on 31 July 2020 are now due on 31 January 2021. This scheme is automatically in place for all self-employed taxpayers and you do not need to make an application. - Link
  • Deferral of self-assessment payments due on 31 July 2020 until 31 January 2021 without interest or penalties. No application is required. - Link

What Other Support is the Government Providing?


  • Relaxation of rules on apprenticeships including modifying assessment arrangements and permitting breaks in learning where businesses are disrupted for over four weeks. - Link


  • Legislative changes to allow employees to carry over four weeks of annual leave into the next two leave years where it is not reasonably practical to take some or all of the leave entitlement due to COVID-19. Legislation implementing this change is now in force. - Link


  • Three-month mortgage holiday for those affected by the virus, including for buy-to-let landlords whose tenants cannot pay rent. This holiday will not affect borrowers’ credit ratings but is not automatic and each bank will have to approve each application through a fast-tracked process. This measure is available now and administered through banks.
  • Increased notice period requirement of three months for new residential tenancy evictions. This measure is implemented through Section 81 and Schedule 29 of the Coronavirus Act 2020. - Link

Please make use of our extensive guidance here, which addresses the growing range of legal issues that you and your business may face. We stand ready to support you and your business through the COVID-19 crisis. Please contact us and we can help you navigate these challenging times. 

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