Government must act on Covid business support before Budget

Time is now for comprehensive reform of business rates system

2021 will be a defining year for the government’s ambition of securing a greener, more dynamic and competitive UK. But with the health and economic impact of coronavirus hitting hard across the country, ensuring firms’ survival until the economy reopens fully will be key to turning this ambition into reality.

Throughout the pandemic, the Treasury has listened and acted swiftly to offer businesses a lifeline.  But with the latest lockdown squeezing cash flow and demand like never before, business resilience is at an all-time low.

In its letter to the chancellor, the UK’s leading business group outlines the support measures needed in the next few weeks, ahead of the Budget, to help protect UK companies through the Spring.  It also recommends actions that should be taken at the Budget itself to build a bridge to a sustained economic recovery by stimulating business investment – with comprehensive reform of the business rates system top of the list.

Ahead of the Budget, the CBI wants to see action on:

1. Extending the Job Retention Scheme beyond April to the end of June and a commitment to targeted support thereafter to give firms the certainty they need to protect jobs.
2. Lengthening repayment periods for existing VAT deferrals until June 2021 at the earliest and allow firms to defer Q1 2021 VAT bills due now for twelve months.
3. Extending the business rates holiday for at least another three months to those UK firms forced to close under current restrictions and expanding relief to their supply chains.

Tony Danker, CBI director-general, said: “The Budget comes at a crucial time for the UK. The government’s support from the very start of this crisis has protected many jobs and livelihoods, and progress on the vaccine rollout brings real cause for optimism.

“But almost a year of disrupted demand and extensive restrictions to company operations is taking its toll. Staff morale has taken a hit. And business resilience has hit a sobering new low.

“The government must once again stand shoulder-to-shoulder with businesses to underwrite support for the duration, helping viable enterprises to last the course.

“Many tough decisions for business owners on jobs, or even whether to carry on, will be made in the next few weeks. If the government plans to continue its support then I urge them to take action before the Budget which is still more than six weeks away.

“The government has done so much to support UK business through this crisis, we don’t want to let slip all the hard work from 2020 with hope on the horizon.

“The rule of thumb must be that business support remains in parallel to restrictions and that those measures do not come to a sudden stop, but tail off over time. Just as the lifting of restrictions will be gradual, so must changes to the Government’s sterling support to businesses.”

Additional pre-Budget CBI recommendations include:

• Delivering the Pay As You Grow scheme for Bounce Back Loans including extending capital and interest payment holidays for a further six months.
• Ensuring the Coronavirus Corporate Financing Facility (CCFF) scheme is kept open until the end of June 2021.
• Announcing details of the successor of the Coronavirus Business Interruption Loan Scheme (CBILS).
• Working with Local Authorities to ensure existing discretionary grants are in businesses’ bank accounts by the end of February 2021.

The Budget also provides a chance to look beyond the immediate crisis to the reopening of the economy. Setting the UK on a path to recovery will rely on unlocking business investment.

At Budget, CBI recommendations include:

1. Using the net-zero transition to drive the UK’s economic recovery

• Driving the shift to zero emission vehicles by committing to the delivery of 7 more gigafactories by 2040 and reviewing fuel duty taxation. Ensuring the new National Infrastructure Bank crowds-in private sector investment and investing in sustainable aviation fuels.

2. Delivering comprehensive reform of the business rates system – to support our struggling high-streets, drive essential investment in energy efficiency and level-up business investment across the UK.

• Freezing the Universal Business Rate (UBR) for the remainder of the current revaluation period and lowering it at future revaluations to a more sustainable level.
• Introducing new relief for businesses that invest in the energy efficiency of their property and upgrading their fixed machinery to improve productivity and energy efficiency.
• Removing transitional arrangements which prevent businesses from benefiting immediately from a reduction in property values and allowing businesses to more easily access relief for partly occupied properties.

3. Turbo-charging innovation spending by government and business

• Introducing a new R&D tax credit for capital expenditure and reduce match funding requirements for R&D grant funding to spur business innovation.
• Delivering an ‘Invest to Grow’ scheme to spur SME spending on productivity enhancing digital technologies.

4. Incentivising greater business investment in retraining and upskilling

• Evolving the Apprenticeship Levy into a flexible Skills and Training Levy to unlock business investment in high-quality accredited training.
• Transforming Jobs Centres into ‘Jobs and Skills Hubs’ to help people to retrain.

Rain Newton-Smith, CBI chief economist, said: “There is clear light at the end of the tunnel and reasons to be optimistic as the UK gets ready to lead the world on tackling climate change through hosting the G7 and COP26 this year.

“The government should use the upcoming Budget to speed ahead to low carbon: to accelerate investment in low-carbon infrastructure – through fundamental business rates reform to promote energy efficiency – and the innovative technologies that will smooth the path to achieving net-zero by 2050.

“This Budget is an opportunity to focus on a balanced economic recovery, not driven solely by consumption and government spending, stimulating much-needed business investment and tackling the systemic challenges that have held the UK back.

“Top of that list must be a fundamental review of our outdated business rates system, to, drive essential investment in energy efficiency, support our struggling high-streets and level-up business investment across the UK.

“Business shares the government’s ambitions of levelling up and boosting productivity and innovation. Tackling the immediate jeopardy facing firms will help build a bridge to a lasting recovery.”

19/01/2021