Rishi Sunak has unveiled his Winter Economy Plan, which outlined an emergency job support scheme to replace furlough.
The Winter Economy Plan follows on from Prime Minister Boris Johnson’s statement implementing numerous restrictions across the UK, including a 10pm curfew on pubs and restaurants.
Stephen Haddrill, director general of the FLA, said: “It is good to see that the chancellor has accepted our recommendation to extend [the Coronavirus Business Interruption Loan Scheme (CBILS)], and we look forward to seeing what the successor scheme for 2021 will look like.
“We have already proposed a revised version of the Enterprise Finance Guarantee Scheme.”
Sunak focused on an emergency job support scheme to replace furlough, an extension for business on government-backed loans, and an extension on the VAT cut for hospitality and tourism companies.
However, several industry figures felt that the chancellor did not address important areas of the economic marketplace.
Haddrill said: “What has not been addressed in today’s announcement, and what continues to be a challenge for our independent lenders, is access to funding that can then be deployed under the guarantee schemes.
“Our members are ready and willing to support SMEs, but they cannot do that without funds.”
Karen Noye, mortgage expert at Quilter, said: “Mortgage lenders are cautious about lending to people at risk of job losses, and anyone that is made redundant will struggle to obtain a mortgage.
“Generally speaking, first-time buyers would expect to be most affected here, both because they represent riskier borrowers with higher loan-to-value and loan-to-income ratios, but also because younger people are more likely to be working in sectors like hospitality where the risk of redundancy is significant.
“But there is also a secondary impact, because if one potential buyer finds their mortgage applications falls through then that can have a domino effect on the chain.”
Noye believes that the chancellor’s pledge as part of the Winter Economy Plan to subsidise up to two thirds of a wage packet for another six months will greatly benefit the housing market.
She added: “The extension to jobs protection should help to sustain this effect through the autumn and into next year.
“However, things could change significantly next Spring in the second quarter of 2021.
“The stamp duty holiday on most transactions is estimated to cost around £2.5bn so it will be expensive to extend.
“Once it comes to an end, and this second round of job support measures fades away, there will likely be a drop off in house moves and mortgage applications.”
Greg O’Reilly, vice president and senior analyst at Moody’s, suggested that the replacement of the furlough scheme with the emergency job scheme will lead to an increase in missed mortgage payments because it will benefit fewer people
He said: “Around 10% of securitised prime mortgages were under payment moratorium based on monthly transaction data received in August.
“So far, maturing payment moratoriums have not resulted in any significant levels of arrears, but this pattern is likely to change starting from end of October, when borrowers will no longer be able to request further payment holidays at the same time that fewer will be eligible for employment support.”
Adam Marshall, director at BCC, said: “The measures announced by the Chancellor will give business and the economy an important shot in the arm.
“Chambers of Commerce have consistently called for a new generation of support to help protect livelihoods and ease the cash pressures faced by firms as they head into a challenging and uncertain winter.
“The chancellor has responded to our concerns with substantial steps that will help companies preserve jobs and navigate through the coming months.”
Marshall explained that almost 40% of BCC’s firms say they have three months cash in reserve or less, and that the new measures will lessen the immediate pressure and provide reassurance for many affected firms at a challenging time.
Carolyn Fairbairn, director general of CBI, said: “These bold steps from the Treasury will save hundreds of thousands of viable jobs this winter.
Fairbairn felt it was right to target help on jobs that have a future, “but can only be part-time while demand remains flat.
“This is how skills and jobs can be preserved to enable a fast recovery.”
She added: “Wage support, tax deferrals and help for the self-employed will reduce the scarring effect of unnecessary job losses as the UK tackles the virus. Further business rates relief should remain on the table.
“Employers will apply the same spirit of creativity, seizing every opportunity to retrain and upskill their workers.
“The chancellor has listened to evidence from business and unions, acting decisively. It is this spirit of agility and collaboration that will help make 2021 a year of growth and renewal.”