No business has been immune from the effects of the Covid-19, but the jewellery sector has in some ways been particularly vulnerable to the economic challenges posed by the virus. While firms in many sectors have been able to adapt to the circumstances by shifting to new and unfamiliar delivery models, the jewellery industry predominantly remains dependent on consumers being able to visit stores in person.
Figures from research firm GFK show that consumer confidence is at its lowest level since the global financial crisis in 2008. As a sector that is considered a luxury or discretionary spend, a decline in confidence is particularly troublesome as consumers look to secure their finances and avoid higher-value purchases.
With business drying up across the economy, the Government has introduced far-reaching schemes in a bid to support the UK economy. These schemes include loans and grants, as well as the Job Retention Scheme (which introduced the term furloughing to our daily dialect), which have been widely adopted across the jewellery industry as a means to support challenged businesses.
Whilst much needed, some of these schemes have been riddled with issues. Firms have, in many cases, struggled to get hold of cash promised by the Government either due to complex or unclear application processes, bureaucracy from banks or delays in administration. For many businesses, the future looks deeply uncertain.
However, firms in the jewellery sector are well placed to take advantage of a number of existing schemes designed to support businesses and many are not yet doing so. One existing scheme that is often overlooked is the R&D tax credits initiative.
R&D tax credits are a form of tax relief paid out to companies working on innovative projects in “science and technology”. If you think this rules out jewellery companies from claiming this cash, you’d be wrong – thousands of businesses outside the science and technology” sector are actually eligible to claim large amounts through the scheme. Our own clients in the jewellery sector claim an average of £40,000 every year through R&D tax credits. Interestingly, most of them are SMEs.
Importantly, HMRC endeavour to pay out within 28 days of a claim being made, meaning that the scheme is one of the fastest and most reliable forms of financial relief. At present, these payments are being made more efficiently than ever. At a time when short-term cashflow is crucial for the survival of businesses up and down the country, this scheme has the potential to make a real difference.
Within the process of manufacturing jewellery, there are a number of activities that may fall into the broad definition of R&D for the purposes of a claim. Casting is the most common technique used for jewellery manufacture and R&D eligibility in this area is high. If you’re investing in optimising hot and cold moulds, or working to improve casting techniques, there’s a good chance that you could claim back a sizeable chunk of your investment in cash from HMRC. For most unique products, the use of resin-based trees is also necessary for improved casting. This is another area that is likely to be eligible for R&D tax credits.
Businesses should be aware of all funding options available to them at this time – both existing and new support schemes can offer valuable support for businesses whose cashflow has been squeezed.
There can be no doubt that the Covid-19 pandemic is a challenging time for the jewellery industry as well as the country as a whole. However, those businesses that take advantage of the range of funding options available to support cashflow will weather the economic storm better, and may well set themselves up for a stronger future when the crisis has passed.
By Cheryl Teoh, Senior Technical Consultant, Leyton UK.