The latest UK budget gave a much-needed lifeline to jewellery businesses, auguring for a pickup in UK demand for Indian gem and jewellery exports in the later stages of the pandemic.
UK Chancellor (Finance Minister) Rishi Sunak announced a series of measures on 3rd March, 2021 to help non-essential businesses, including jewellery retail and wholesale, such as grants and cheap guaranteed loans that will help them weather the crisis.
However, larger UK businesses face the prospect of looming corporation tax rises as the government seeks ways to pay off its huge public spending bill caused by Covid-19.
The government’s support to UK jewellery businesses, which are still under national lockdown with jewellery retailers shuttered, will enable them to continue to source from Indian gem and jewellery suppliers, notably to import manufactured gold and silver jewellery, as well as diamond and coloured gemstone set jewellery, and handcrafted jewellery.
The recent slide in gold prices to a near nine-month low, triggered by a rise in US Treasury yields and a strengthening US dollar, will create opportunities for UK jewellers to import gold jewellery from India at more reasonable prices.
A stronger pound will also boost the purchasing power of UK-based jewellery importers.
Many analysts see risks that the trend in the gold price, which can often roughly correlate with the direction of silver, will fall further as the global economy recovers and the vaccination rollout proceeds, reducing the “safe-haven” appeal of bullion.
The highlights of the UK budget were:
Chancellor Sunak confirmed the extension of the Coronavirus Job Retention (Furlough) scheme until the end of September 2021. Employees will continue to be paid 80% of their salaries.
The government also announced a major extension to the Self-Employment Income Support Scheme (SEISS) – and crucially, for the first time since the scheme launched its scope will now be widened to include some of those who weren’t previously eligible.
A fourth SEISS grant, covering February–April, will now be worth 80% of trading profits for three months, capped at £7,500. Applications for this fourth SEISS grant will open in April.
A fifth SEISS grant will then be offered beyond April, covering April-September.
The Chancellor announced the availability of Re-start grants from April, for those businesses in the retail, hospitality, and leisure sectors, which have been hardest hit by the repeated lockdowns.
The grants, which Sunak said are designed to “help businesses open and get going again” will see £6,000 per premises made available for non-essential retail businesses, including jewellers.
Additionally, the Bounce Back Loan and Coronavirus Business Interruption Loan Scheme (CBILS), which has seen more than £70 billion paid out to businesses, is being replaced with a new Recovery Loan Scheme. This will see loans from £25,000 to £10 million made available to businesses up to the end of the year, with the government providing lenders with an 80% guarantee.
Retail, hospitality and leisure businesses have been given an extension to the 100% business rates holiday, which had been due to expire at the end of this month. This will now run until the end of June.
There will then be a further six-month period where rates will be two-thirds of the normal charge, up to a maximum of £2 million for closed businesses.
As part of the government’s Plan for Jobs to support, protect and create jobs, the Chancellor said he is increasing support with £126 million of new money to enable 40,000 more traineeships, and doubling the cash incentive to firms which take on an apprentice to a £3,000 payment per hire.
The National Living Wage will be increased to £8.91 per hour from April.
Corporation Tax
As well as measures designed to kick-start the UK economy following the coronavirus crisis, Sunak outlined plans to help pay for some of the government’s borrowing.
One way he said the government planned to do this will be to increase the rate of Corporation Tax to 25%, which Sunak said will remain the lowest rate in the G7.
In order to support the economic recovery, the increase will not take effect until 2023.
Additionally, businesses with profits of £50,000 or less, around 70% of actively trading companies, likely to include many jewellers, will continue to be taxed at 19%.
A tapered rate will also be introduced for profits above £50,000, so that only businesses with profits of £250,000 or greater will be taxed at the full 25% rate.
Digital skills support for small businesses
The Chancellor announced a new set of UK schemes called “Help to Grow”.
This will include projects to support people get management training and train small businesses in digital skills. Sunak said the scheme could help 130,000 SMEs become more productive.
The government said that, under the new scheme, firms will have access to digital and management services.
Its digital offer will create a new online platform to offer free advice on technology that will help businesses to save time, reduce costs, and reach more customers.
Eligible SMEs will also be given vouchers to get up to 50% off the purchase of new productivity-enhancing software, up to £5,000 each.
Freeports
Sunak announced the creation of new English Freeports based in East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside.
These Freeports will be special economic zones with different rules to make it easier and cheaper to do business.
Goods that arrive in Freeports from abroad aren’t subject to the tariffs that are normally paid to the government.
These taxes only become payable when the goods leave the Freeport and are moved somewhere else in the UK.
The Freeports are designed to encourage inward and private investment, create tax reliefs which encourage production and enhance productivity and create new opportunities to those who import and export.
Following the announcement of which locations have been selected, it is expected that Freeports will be set up later this year.
Hallmarking
The pandemic has punished the UK jewellery sector, contributing to a 45.5% year-on-year slump in the number of hallmarked items in January 2021.
According to the latest data from Birmingham Assay Office, the number of hallmarked gold items slid by 40.9% year-on-year in January 2021; silver items dropped by 48.8%; and platinum items by 48.2%.
The ongoing government support to the UK jewellery sector should pave the way for an eventual rebound in jewellery and gemstone sourcing, and in hallmarking volumes as domestic consumer demand picks up, jewellers say.
Britain has driven forward one of the world’s quickest vaccination rollouts, auguring for a relatively swift recovery of its economy.
Concerns over the speed of India’s vaccinations campaign and effectiveness of social distancing, as well as quarantine constraints, will complicate decisions to attend IIJS Signature in person in April, UK jewellers say. But they are more optimistic about the chances of visiting IIJS in August when vaccinations will have rolled out much more and travel restrictions may have eased.