U.K. Firms Face $68 Billion ‘Bombshell’ Unless Aid Extended
(Bloomberg) -- U.K. businesses face a 50 billion-pound ($68 billion) “bombshell” unless a series of government pandemic aid programs are extended, the Labour opposition warned.
With many firms running out of cash, the party urged Chancellor Rishi Sunak not to wait until his budget on March 3 to prolong business rates relief, a sales tax reduction and his flagship furlough program. Labour’s figure is a rough estimate of the extra costs firms will face if the programs expire as scheduled over the next month or two.
“The 50-billion pound business bombshell firms face must be defused before it blows a hole in our economy,” Lucy Powell, a business spokeswoman for the party, said in a statement. “We need a smarter furlough scheme, and better support for businesses, to secure jobs and get Britain on the road to recovery.”
With no prospect of the economy even starting to reopen for at least another month, Sunak’s office has signaled the priority for the budget is protecting employment.
Businesses last year deferred 34 billion pounds of Value Added Tax, which they must now pay the Treasury by March 31, or arrange for repayment in installments. Separately, a reduced rate of VAT for the hospitality and leisure industries also expires at the end of March.
A business rates holiday, estimated to save companies 9.6 billion pounds, expires at the end of the current tax year on April 5. The furlough program, which pays as much as 80% of the wage of employees unable to work because of coronavirus rules, is due to expire at the end of April.
Separately, a cross-party panel of lawmakers urged Sunak to extend a 20 pounds-a-week uplift to the Universal Credit welfare payment by at least a year. The Work and Pensions Committee also said the chancellor should reject proposals to pay a one time bonus instead of extending the weekly uplift.
The 6 billion pound-a-year measure comes to an end in April, and Work and Pensions Secretary Therese Coffey has been locked in discussions with the chancellor over options including extensions of different lengths.
Scrapping the uplift “would represent a failure by Government – failure to recognize the reality of people struggling,” committee Chairman Stephen Timms said in a statement. “Without regular support, hundreds of thousands of families will be swept into poverty or even destitution.”
©2021 Bloomberg L.P.