The United Kingdom will grant businesses an extra £4.6 billion as the country enters a third COVID-19 lockdown, but lobby groups continue to call for longer-term measures, such as VAT deferrals, to help companies survive.
Chancellor of the Exchequer Rishi Sunak announced January 5 that the government would give one-off, top-up grants of up to £9,000 per property to businesses in the retail, leisure, and hospitality sectors in a bid to keep them afloat through the spring.
Local authorities and the devolved administrations of Northern Ireland, Scotland, and Wales will also collectively receive an additional £594 million to help businesses affected by the lockdown that are ineligible for the extra grants.
Sunak’s announcement comes on the heels of Prime Minister Boris Johnson’s January 4 announcement that yet another national lockdown until at least mid-February was necessary to curb the rapid rise of COVID-19 cases and to contain a new U.K. variant of the coronavirus that causes COVID-19. More than 600,000 business properties worth £4 billion are expected to receive top-up grants, according to HM Treasury.
“The new strain of the virus presents us all with a huge challenge — and whilst the vaccine is being rolled out, we have needed to tighten restrictions further,” Sunak said. The additional aid “will help businesses to get through the months ahead — and crucially it will help sustain jobs, so workers can be ready to return when they are able to reopen,” he added.
The U.K. government has granted business support throughout the pandemic, including increasing the business rates retail discount to 100 percent for one year for retail, hospitality, and leisure firms; extending the U.K. furlough scheme; and increasing grants under the self-employment income support scheme.
However, Anneliese Dodds, Labour’s shadow chancellor, demanded in a January 5 statement that Sunak give an urgent statement on the new round of economic support when Parliament reconvenes January 6 and explain how the government will support employees, self-employed people, and others. Existing support schemes for households and businesses are set to expire throughout the spring, while the government plans to increase the council tax by 5 percent, cut frontline workers’ pay, and slash universal credit, the statement adds.
“Instead of delivering the support that Britain needed, [Sunak is] plowing on with plans to hit people in their pockets with pay cuts, benefits cuts, and tax rises,” Dodds said. “Sunak must come to Parliament tomorrow and finally set out a long-term plan to protect jobs and livelihoods and put Britain on the path to a better, more secure recovery.”
The latest round of support measures is welcome, and more direct grants will give some relief to eligible companies facing cash flow problems, according to Rain Newton-Smith, chief economist at the Confederation of British Industry.
“Yet with businesses facing a third lockdown, there are other steps that can help provide a bridge to the all-important economic recovery, particularly those affected through supply chains,” Newton-Smith said in a January 5 statement. These steps include extending the job retention scheme to the end of the second quarter of 2021, she added.
Moreover, “removing the business rate relief cliff edge in April will provide much-needed breathing space, as will re-examining the case for VAT deferrals,” Newton-Smith said.
Adam Marshall, director general of the British Chambers of Commerce, said the government’s “drip-feed approach” won’t be enough to save many businesses from failing and called on the government to introduce a broader, long-term support plan for 2021 to help all businesses.
“Many smaller firms won’t qualify for the full headline amounts set out in the chancellor’s statement, and will be left struggling to see how this new top-up grant will help them out of their cash-flow problems,” Marshall said in a January 5 statement. He had previously said the new lockdowns in England and Scotland would be a “body blow” to businesses that are also struggling with weak holiday sales and uncertainty surrounding the Brexit transition period.
Support measures should cover companies in supply chains and other business sectors affected by the lockdown restrictions, not just those in the retail, hospitality, and leisure industries, Marshall added. The British Chambers of Commerce wrote to Johnson in December 2020, pushing for specific long-term measures, including extending business rates relief to all businesses unable to generate revenues amid the pandemic and extending VAT deferral to the end of 2021 at the minimum.
The new lockdown grants will do little to help struggling small businesses, according to Mike Cherry, national chair of the Federation of Small Businesses. The government must do more to offer support to newly self-employed individuals, firms in supply chains, and company directors, he added.
“We continue to call on the government to create a directors income support scheme, mirroring the self-employed support scheme, in the form of a taxable grant for directors of limited companies calculated at 80 percent of three months’ average monthly trading profits, paid out in a single installment and capped at £7,500,” Cherry said in a January 5 release.
Cherry also called for the government to come up with a spring economy plan to support small businesses even after lockdown restrictions are lifted and vaccinations continue. “After clawing their way through 2020, the start of the new year looks set to be an even worse one for many,” he said. “Small businesses are the backbone of our economy, and it is absolutely vital we support them in every way possible until the crisis finally begins to ease.”