Seven Options for Sunak to Help U.K. Business Weather Omicron Wave
(Bloomberg) -- Rishi Sunak will hold crisis talks with U.K. businesses on Friday about how to counter the fallout from a record surge in coronavirus infections.
The chancellor of the exchequer on Thursday cut short a working visit to California to face a growing clamor from hospitality companies and members of his own Conservative Party to alleviate the blow of what the Confederation of British Industry has called a “lockdown by stealth,” as Britons steer clear of social gatherings.
So far, the Treasury has resisted unveiling any new aid package, pointing instead to measures that are already in place. Participants in calls with Sunak and his ministers on Thursday described the U.K. finance ministry as being in listening mode.
Here are some options open to the chancellor:
Sales Tax Reduction
Hospitality businesses, holiday accommodation and attractions currently benefit from a reduced 12.5% rate of value-added tax (sales tax) until March 31. The usual rate is 20%.
Options for Sunak include extending that reduced rate until a later date, widening its scope to include supply chains and leisure businesses, and cutting the rate further. Earlier in the pandemic, it was at 5%.
One disadvantage: the measure only helps if businesses are making sales. If they aren’t, they don’t benefit from the relief.
Business Rates Holiday
Retail, hospitality and leisure businesses benefit from a 66% discount on their business rates bill until March 31, capped at 2 million-pound ($2.7 million).
Sunak could reinstate a 100% relief that was in place earlier in the pandemic, extend its duration, or raise the cap on the maximum amount that can be claimed.
The Federation of Small Businesses has called for an acceleration of the 1.5 billion-pound business rates hardship fund for supply chain companies, which was promised in March.
Extending business-rates relief would help by removing costs in the future, allowing companies to start rebuilding cash balances depleted due to a drop in revenues.
The government has a grant program in place allowing local councils to pay out more than 2 billion pounds to businesses struggling to cope with the pandemic. The program is due to close in March. Treasury Minister John Glen on Thursday said some 250 million pounds is yet to be paid out.
Sunak could choose to pour more cash into the grants program. He also could extend its duration. That would help those companies suffering from a shortfall of revenue as customers cancel bookings and stay away from hospitality and entertainment venues in city centers.
Lenders are able to offer 70% state-backed loans under the government’s Recovery Loan Scheme, which is open until June. It replaced a bevy of state-backed coronavirus loan programs.
Sunak could choose to push back the deadline for applications for companies seeking the loans. Other options include interest-free periods, extending repayment holidays and lengthening the period over which loans must be repaid.
The government splurged some 70 billion pounds on its flagship furlough program, paying up to 80% of the wages for 11.7 million jobs between March 2020 and September this year, when it closed the plan.
While the Treasury has shown no appetite for bringing back furlough, some business groups -- including the British Chambers of Commerce -- say it may be necessary, especially if new and longer-lasting Covid restrictions are brought in.
Until September, small employers were able to reclaim statutory sick pay for those workers off due to Covid. With the new omicron wave taking hold and infections at a record, the FSB is foremost among industry groups calling for a revival of the program.
Businesses are currently protected from eviction from their premises if they are behind on rent, with a moratorium in place until March.
Sunak could choose to extend that protection, though that risks alienating commercial landlords who say the moratorium has lasted too long as it is.
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