Government must use Budget to soften March cliff edge
Businesses are facing a devastating cliff edge when on 31 March the packages of support made available comes to sudden end. The Chancellor, Rishi Sunak, in his 3 March Budget should look to introduce a new package of support that tapers off over time giving businesses the opportunity to rebuild and thrive.
Support that comes to an end on 31 March includes:
- Business rates relief for the retail, leisure and hospitality sectors,
- VAT cuts for hospitality and travel accommodation,
- Government loan schemes,
- The moratorium on commercial landlords evicting tenants, and
- Creditor statutory demands and winding up petitions.
We offer some ideas.
Review business rates
Business rates have long been a source of frustration, particularly for traditional bricks and mortar retailers who feel penalised for their high street footprints. The recent reform of business rates has proven to be deeply unsatisfactory, highlighted further by the COVID-19 pandemic. The pandemic provides government with a perfect opportunity for a wholesale review of business rates into a more progress tax that supports bricks and mortar business and our valued high streets.
CBILS continue to be enormously valuable to businesses. Initially offered on six-year terms, the government has said they should be extended to a 10-year term, immediately helping ease cash flow challenges many businesses face. Many banks continue, however, to offer on six-year terms. This needs to change.
Debt to government equity
Businesses will have accumulated considerable debt during the COVID-19 pandemic that may hold back businesses for decades to come. Banks are, quite naturally, reluctant to swap debt for equity and are in many instances unable to do so, but could government?
The Chancellor should be encouraged to explore ways it can take equity in UK businesses, sharing in their future success. A department for enterprise would inevitably create new employment opportunities too.
We have seen anecdotal evidence of businesses adopting flexible furlough policies, bringing staff back into the office for just one or two days a week. The government could quite simply maintain a flexible furlough scheme, phasing it out over a six or 12-month window.
Many businesses have successfully pivoted, often in very dramatic ways, in response to COVID-19. Whilst the R&D tax credit system already provides generous incentives to businesses involved in scientific or technical advancements, we would encourage the government to go further. There has been much discussion about “building back greener” and “digitalising the economy” and further incentives could support this.
Join our Budget question time webinar
We’ll be hosting a Budget question time webinar on Friday 5 March to answer your Budget related questions, highlight the key implications and provide insight and guidance for the next steps you will need to take. Find out more and register your place here.
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