Keep Spending: What U.K. Businesses Want From Sunak’s Budget

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The leaders of the U.K.’s most influential business groups, who frequently help shape government policy, urged Rishi Sunak to keep spending to help British companies survive.

As the economy struggles to rebound from its deepest slump in three centuries, the five biggest industry organizations want the chancellor of the exchequer to extend coronavirus support and spur investment in his budget on March 3.

The pandemic has forced Sunak to expand the role of the state in ways unimaginable when he became finance minister a year ago.

Keep Spending: What U.K. Businesses Want From Sunak’s Budget

The views of the so-called B5 group -- made up of the Confederation of British Industry, Make UK, the Institute of Directors, the British Chambers of Commerce and the Federation of Small Businesses -- matter because they have the ear of Sunak and Business Secretary Kwasi Kwarteng. Here’s what they want to see:

Furlough

Sunak’s flagship pandemic aid program pays furloughed workers as much as 80% of their wages, and runs through April. With 3.8 million jobs supported by the program at the end of 2020, business is united on the need to extend it.

The CBI proposed an extension through June, with targeted support thereafter for the worst-affected businesses, such as those in hospitality. The BCC said it should run through July. Make UK proposed a September cutoff, followed by a job retention bonus for companies which keep workers on. The IoD proposed a gradual taper.

Self Employed

The IoD says support grants for the self-employed should be tapered, while the FSB and BCC propose its scope be expanded to include limited company directors who have missed out on any targeted support. The IoD also wants help for owner directors, but says they should be helped through grants paid out by local councils.

Any extension to the job support programs would add to a budget deficit that’s already on course to hit around 400 billion pounds ($550 billion) in the current fiscal year, the highest in British peacetime.

Keep Spending: What U.K. Businesses Want From Sunak’s Budget

Business Rates

Sunak gave businesses in the retail, hospitality and leisure sectors a year-long holiday from business rates, a tax on commercial property. That expires in April, and the lobby groups are calling for the relief to be extended by three months to a year.

Some say it should be widened to other struggling sectors. The IoD proposed a business rates holiday for companies improving, expanding or moving into new properties –- as an incentive for investment. There’s also a clamor for longer-term reform of the business rates system, which critics say adds to the burden of firms struggling to compete with online rivals.

VAT Deferral

Businesses last year deferred 34 billion pounds of value-added tax, a sales tax, but payment to the Treasury is due by March 31. The CBI said those liabilities should be repaid over a longer period, and called for a fresh postponement for payments due over the next three months. The BCC called for a deferral of VAT payments until at least the end of 2021.

Cash Grants

The BCC called for more grant support for suffering businesses, at least equivalent to 25,000-pound grants awarded in the first lockdown last March. The IoD said grant support should be “explicitly badged” as a fund that local authorities can use to support owner-directors and the newly self-employed.

Investment, R&D

The Annual Investment Allowance normally provides tax relief for the first 200,000 pounds of investment, though an increase to 1 million pounds is in place until the end of 2021. Make UK called for a five-year extension. The IoD and BCC also want an extension, with the latter saying its scope should be widened to include investments in training, emissions reductions and spending related to coronavirus.

Another proposal is to double research and development tax credits, and for the expansion of their scope to include capital expenditure.

Pandemic Loans

Sunak has promised a successor program to his Coronavirus Business Interruption Loan Scheme, which remains open for new applicants until the end of March and provides lending that’s 80% state-backed. The Business groups are seeking more details of the plan.

Together, firms have taken out more than 80 billion pounds of emergency loans, and there are warnings that a significant share will never be repaid as firms go bust.

Keep Spending: What U.K. Businesses Want From Sunak’s Budget

Skills/Work

Sunak has said jobs and skills are his priorities as he braces for the wave of unemployment expected to be unleashed as he unwinds programs like furlough. Here’s a flavor of what the B5 are proposing:

  • Reforms to the apprenticeship levy to make it more user friendly
  • Changes to Sunak’s Kickstart program that provides six-month placements for 16-24 year olds, including proposals to extend it, accelerate it and widen its scope to include older workers
  • A cut to employers’ national insurance contributions, a payroll levy, to incentivize hiring
  • More spending on training programs to help workers develop new skills

Net Zero

Prime Minister Boris Johnson has pledged to eliminate the U.K.’s carbon emissions by 2050, but to help him achieve that, businesses want incentives.

Make UK wants a carbon footprint calculator, green finance products and sustainability training for managers.

The CBI proposed seven new so-called gigafactories to make electric car batteries by 2040 and a review of fuel duty, which has remained frozen for a decade. It also called for 500 million pounds of investment in sustainable aviation fuels.

Infrastructure

Infrastructure is another key plank in Sunak’s effort to jump-start the economy. In November he published a National Infrastructure Strategy and announced the creation of a national infrastructure bank. The BCC said that should be capitalized with 20 billion pounds.

Make UK and the IoD want digital infrastructure to be a government priority, and emphasized the importance of spending on local roads and rail links.

Managing Brexit

Brexit – completed on Dec. 31 -- has snarled up the border and increased red tape for businesses. The IoD called for vouchers to help companies access the professional services needed to manage the new export processes. Make UK said Sunak should provide tax rebates to help companies dealing with Brexit-related costs. The BCC called for a tax credit to help companies adapt to the new arrangements.

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