Newsletter: July 2021

With Covid-19 restrictions easing, the weather remaining consistently warm and the England football team looking like they are actually bringing it home, July 2021 seems a jovial period. But how does the economy fair and what does this mean for most businesses?

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Football fever

When the format of the new European Championship was first announced, we would be forgiven for thinking this was to encourage travel between all participating countries. It certainly has not panned out that way, but the tournament has by no means been a failure, least not for England anyway.

With 24m viewers tuning in for the semi-final victory and a predicted 33m for the final on Sunday, we are right to assume football is the major talking point of July. But what does this mean for business?

With Covid-19 restrictions not fully eased until later in the month, Wembley will only hold a maximum of 60,000 fans. A bulk of the remaining viewers will gather in pub gardens to cheer on the lions.

We cannot overlook the importance of these gatherings to small businesses as the knock-on effects of such events are huge. Pubs, takeaways, grocery stores, taxis will all relish the event. Staff may even benefit from overtime, with the government allowing premises to remain open for an additional 45 minutes for the event.

With England remaining in the tournament until the final game, the prolonged benefits of Euro 2020 for small businesses is fitting considering the turbulent last 18-months. Irrespective of the result on Sunday, many local businesses will already feel like winners!

Covid-19 restrictions

In a widely publicised toing and froing in government, it has been announced most legal Covid-19 restrictions will ease on 19th July.

This will be particularly welcoming news for those in the hospitality sector. Nightclubs can open, pubs will no longer be required to provide table service only, there will no longer be limits on weddings, funerals, concerts, sporting events and theatre.

We are likely to see a rebound effect for many of these events, with people splashing lavishly using the savings they accumulated during the restrictions.

There are even talks of staff shortages, which will be music to the ears of those who previously lost their jobs due to the pandemic. New job openings are also perfectly timed for those in full-time education and are breaking up for summer holidays

This will go someway to reducing the 4.7% unemployment rate as at the end of April 2021, according to The Office of National Statistics.

Travel

From 19th July 2021, any guidance which was previously recommended against travelling to amber listed countries has been removed by the government, as has the need to quarantine, for those who have received both vaccine doses.

Easyjet have since announced a 440% increase in bookings to amber listed destinations, from the previous week - yes 440%! This tells us, people have saved money and are keen to spend it! Although savings are necessary, they can be bad for the economy, a regular circulation of money would always be the target.

As much as the government would encourage people to take breaks and benefit from a well-earned rest, they’d prefer the UK population to go on stay-cations and glamping trips this summer. This would keep UK money in the UK and would see shifts from savers to small businesses.

Stamp duty

The start of July 2021 saw tax holidays being phased on property purchases. The holiday was introduced a year ago to encourage property purchases which had stagnated in the earlier months of the pandemic.

It can be argued the holiday not only carried the baton for property sales, but it actually pushed house prices up. Nationwide reported an annual house price increase of 13.4%, which is the highest level since November 2004.

The government themselves rely on the tax generated from stamp duty, so it will be in their interests to reintroduce it but will this be at the expense of slowing the property market?

With the stamp duty now being phased out some experts feel house prices must fall, prices fell by 0.5% in June, which doesn’t seem like much when you consider the average house had a £21,000 increase in 12-months. This could be an early indicator of things to come, but there are far too many variables to the property market to make a concrete assessment yet. We shall eagerly wait for now.

Furlough

The job saving scheme which was introduced and extended by the government four times, is starting to unwind and close at the end of September.

Furloughed staff had 80% of their wages paid by the government up until June, this is drawing back to 70% in July and 60% in August and September. Employers are expected to pick up the shortfall whilst the government is scaling back.

Small businesses owners are encouraged to bring staff back and stimulate business growth. Owners are already paying pension and national insurance and will see furlough staff costs rise from £155/month to £322/month in July and £489/month in August and September.

Businesses will seriously consider their cash flow positions going forward or worse scale back on staff. We may see an increase in unemployment due the maturity of the furlough scheme but there is optimism the majority of jobs will be saved, due to the economy reopening.

With so much happening, there will surely be an impact on you and your business. Speak to someone from our team today to discuss how this will directly affect you and how to be prepared. Please call 01733 639076 or email hello@virtue.accountants with details on what you would like to discuss. We’d love to hear from you!

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