Home Business News MPs must urgently consider economic support as Covid restrictions take their toll amid speculation over further measures

MPs must urgently consider economic support as Covid restrictions take their toll amid speculation over further measures

by LLB political Reporter
21st Dec 21 12:06 pm

The Federation of Small Businesses (FSB) has today released a ten-point plan of options for economic support that Ministers should urgently consider as current Covid restrictions take their toll, and amid speculation about further measures.

The list includes necessary steps to support sectors such as hospitality which are already bearing the brunt of lost trade, as well as other options to help small businesses as a whole continue to function through the New Year and into the Spring.

FSB is calling for 100% Business Rates relief for eligible retail and hospitality businesses, as well as a cut in VAT to 5% for tourism and hospitality. These sectors have already been hit hard by the cumulative effects of working-from-home guidance, cancelled Christmas parties and some customers choosing to reduce outside contact before Christmas. The hospitality sector alone accounts for 3.2million jobs in the UK.

Those in supply chains to these sectors should also be supported, including through unlocking funds from the Business Rates Relief Fund, which was announced in March but is still not up and running.

For the UK’s 5.5million small businesses more widely, FSB’s proposals – which have been put forward in a series of high-level meetings with ministers and officials – include reinstating the Statutory Sick Pay (SSP) rebate, a VAT deferral, the reintroduction of the Jobs Retention Bonus, and a Hardship Fund in England to match similar support in Scotland and Wales.

FSB National Chairman Mike Cherry said, “It is incumbent on Ministers to consider an Economic Plan at the same time as it publicly debates further health restrictions.

“At the very least, Government should already be reducing the fixed tax burden levelled on businesses when it is actively attempting to reduce social contacts – if more onerous measures are being considered, then it is essential to consider more comprehensive support for businesses and jobs at the same time, such as re-introducing the Jobs Retention Bonus.

“In hospitality, we’re hearing of dire examples from our members of cancellations and no-shows on a vast scale, stock having to be thrown away, and staff hours reduced. This, in turn, is hammering firms in the supply chains of these businesses.

“Failure to introduce business support to match the scale of public health restrictions will be damaging to the economy, jobs and communities.”

The list of options proposed for consideration by FSB includes:  

  1. Increase the 21/22 66% business rates relief for eligible retail and hospitality businesses to 100%: As Government seeks to reduce social contact, it should also reduce the fixed tax burden which it levels on firms impacted by its actions. As business rates are a fixed cost that small businesses have to pay regardless of whether they make a profit, reducing this fixed cost will help to reduce the month-by-month losses that result from reduced takings. This would bring the situation in England in line with that in Wales and Scotland.
  2. Urgently release the £1.5bn Business Rates Relief Fund to help supply chains: The Government previously recognised that those who supply to sectors like hospitality and tourism – from baggage handling companies serving cruise ships to restaurant food suppliers – should not be paying the high level of business rates they have throughout the pandemic. However, the fund announced in March 2021 to give rates relief to these suppliers is still not up and running. Central Government guidance on this fund should be released before the New Year so that Local Authorities can action this promised support.
  3. Reinstate the Covid SSP rebate for all SME employers: Government recently withdrew the pandemic Statutory Sick Pay Rebate which was put in place as a safety net to help SMEs cover the cost of sick pay as people self-isolate as a result of Covid-19. Restoring this scheme will help firms deal with the large numbers of workers expected to be absent in the coming months. Not every employer will need to use the scheme, but the safety net it provides reduces uncertainty at a time when many firms workforce and business planning is impacted by the possibility that significant proportions of their staff will be absent at once.
  4. Re-introduce the Jobs Retention Bonus. This would support firms to retain workers – and to support those employers most impacted by Covid. The Jobs Retention Bonus – planned originally as a £1000 bonus for retaining furloughed workers – corresponds with firms’ use of the furlough scheme and so is a way of ensuring help is delivered to those suppliers – as well as frontline hospitality firms – who have been heavily impacted by Covid. Paying a retention bonus for furloughed workers who are retained in December and January, on the 31st January would be a very sensible intervention if the expectation is that the Omicron wave is sharp, but short. In the instance of further restrictions short of total lockdown, such as if indoor hospitality is reduced, this type of help would enable firms not only to retain staff but to retain operating at the same time, albeit in limited circumstances. This is because it would help make restricted operation viable by supporting staff costs but enabling staff still to work, which will enable firms to work even if margins are significantly reduced.
  5. Reduce employer national insurance. Cutting the tax that employers send to Government in return for being allowed to employ people, for instance by increasing the Employment Allowance from £4k to £5k or by scrapping the biggest tax rise in history due to come in in April, would reduce fixed costs that arise from retaining jobs. This could help SMEs retain staff over what is bound to be a challenging period, with consumer demand reducing and employment costs rising – and help small firms recruit those who have sadly lost their jobs. Unlike employment measures to date that have focused on preserving existing job matches, i.e. helping people keep their existing jobs, this measure would also help firms who are under less pressure to recruit more workers, creating new job matches and preserving employment through workers finding new jobs as well as retaining existing work.
  6. Reduce VAT in tourism and hospitality. This will have the effect of allowing hospitality firms to raise prices to cover for their lost Christmas trading without reducing consumer demand. The ‘Golden Quarter’ – which includes Christmas, is the most important part of the year for hospitality and it will take significant extra revenue in the rest of the year to allow hospitality to recover from the damage to the quarter impacted already. This will also allow hospitality to remain attractive to customers as the pandemic eases, and help to reduce the price rises customers would otherwise experience. VAT could either be reduced to 5 per cent or kept at 12.5 per cent beyond April.
  7. Introduce a ventilation grant scheme to assist small businesses in making their premises COVID-secure for the long term. This would allow small businesses in the hospitality and tourism sector to improve ventilation in their premises, through instillation of ventilation systems such as new windows or mechanical ventilation. In addition, these changes should be zero rated, to ensure small businesses are not hit with an increased business rates bill for improving the health and safety of their premises. At a time when many firms are expecting to be locked down, this would help justify – and pay for – the cost of making changes to premises which, if affordable, could help reduce transmissibility of Covid-19 in indoor settings.
  8. Introduce a Hardship Fund in line with Scotland and Wales, and speed up Local Authority delivery of Grants. Many Local Authorities have acted rapidly to distribute Covid-19 Support Grants, but in some areas misconceptions are delaying the delivery of these grants. Central Government must make clear to Local Authorities that this grant funding should be used for direct support to businesses and delivered immediately. Scotland and Wales already have Hardship Funds being put in place, and new grant funding would bring England into line with Scotland and Wales.
  9. Defer quarterly VAT payments accrued from trading in this quarter. Many small businesses were trading successfully prior to the introduction of Plan B. Enabling the deferral of quarterly VAT payments for trading in this period would help businesses deal with the cashflow shock of the measures already put in place and any further restrictions.
  10. Give proper breathing space to businesses struggling with Covid debt. This should include extending Pay As You Grow (PAYG) to CBILs loans and bringing in further loan holidays for those with bounce back loans. The cost of servicing debt at a time when trading is limited will make it even more difficult for firms to survive, recover and ultimately thrive.

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