The third theme of our recovery plan looks at the economy and how best business can stave off what many are predicting to be a torrid period ahead for jobs and growth.
Whilst many businesses have continued to trade through this period with reduced staff and/or home working, overall demand and business confidence has slumped to record lows with huge numbers of businesses facing a cash crunch.
Government support has been swift and expansive with several hundred billion promised either in direct cash support or through loan guarantees aimed at preserving income for business and preserving people’s jobs. The Job Retention Scheme saw the first ever use of direct government financial support for businesses to encourage the furloughing of staff and has been widely used and praised as a success. However with changes due to happen around increased employer contributions and part time furloughing it is to be hoped that the Treasury not only has got its sums right but has planned ahead effectively to ensure those that need help the most get it.
Grant monies have been distributed via local authorities to those sectors hardest hit especially around hospitality, leisure and tourism with further funds announced. Charities have been able to access grant funding where possible to allow for the drop off in donations.
Gaps still exist in several areas but gradually these are being taken care of with fine-tuning of existing initiatives and new schemes being announced such as the Bounce Back Loans.
It is safe to say that we have reached the end of the first stage of financial support with the immediate response and reaction now taking effect. It is vital though that as we transition into the ending of restrictions and encouragement to “restart the engines of industry” that this support is maintained – adapted where necessary – otherwise a liquidity crisis could quickly become an insolvency crisis in Q3 or Q4 2020.
There are increasing calls for a July review – a mop up if you like – to take into account not only those who have taken advantage of support on offer, but for those who have not done so yet or whose circumstances may have changed and now require further assistance.
ISSUES TO CONSIDER:
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Some sectors will return to full work at later stages than others and will therefore need a different approach to one-size-fits-all financial support. Changes have already been made to the Furlough scheme with an extension to its original June end date and changes to allow part time furlough of staff later in the scheme. What other considerations are needed for a strong financial support mechanism?
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Businesses will need to be fully aware of any future liabilities created by deferring payments to HMRC or others as well as commencement of full repayments on loan schemes where interest has been deferred. How can this be built into any future systems to make sure businesses don’t face a cliff edge of liabilities?
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Where any existing grant monies exist from underspend in local authorities what are the best ways to put these to use in supporting business through innovative measures?
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Funding should not just be used to get businesses through the next trading period but should be increasingly aimed at job retention/workforce training; recruitment of new staff and wider business investment focussed on local needs. What could this job/labour-led activity look like?
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Revisit local taxation and business rates in particular which is long overdue for a complete rethink and reshape. Upfront taxation has always placed a burden on business how can this new look local taxation mechanisms be brought in and what should their funds be spent on?
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If there are to be delays for increases in taxation to repay government borrowing until the economy is robust enough to stand it, how long should these be for and at what stage should tax increases be introduced?
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How can low-paid (critically important) jobs be protected, and a serious effort made to improve working conditions and wage levels?
The Chamber will be setting up a task group to look at this issue and if you want to take part let me know on the e-mail below. Likewise if you have any comments or ideas on this again please get in touch.
Chris.fletcher@gmchamber.co.uk