Chan­cel­lor may need to put ex­tra fuel in the tank in weeks to come

We have made wel­come progress to save jobs and busi­nesses but min­is­ters must re­main open to more

The Daily Telegraph - Business - - Summer Statement - Han­nah es­sex Han­nah Es­sex is co-ex­ec­u­tive di­rec­tor of the Bri­tish Cham­bers of Com­merce. @Walk­er_Es­sex

Rishi Su­nak took up the job of Chan­cel­lor at the most ex­traor­di­nar­ily chal­leng­ing time for the UK and our econ­omy. Just five weeks af­ter his ap­point­ment, the coun­try went into lock­down, tem­po­rar­ily clos­ing large num­bers of busi­nesses and throw­ing many more into un­prece­dented un­cer­tainty. The Bri­tish Cham­bers of Com­merce’s lat­est eco­nomic sur­vey has shown the im­pact of the pan­demic, with key in­di­ca­tors of busi­ness per­for­mance in­clud­ing sales and cash flow fall­ing to his­toric lows. Longer-term in­di­ca­tors of busi­ness con­fi­dence have also de­creased sharply, which could dash hopes of a swift “V-shaped” recovery.

The Chan­cel­lor has since taken un­prece­dented steps to pro­tect jobs and keep busi­nesses afloat in re­sponse to the cri­sis. Fur­ther bold steps this week will be warmly wel­comed by busi­nesses around the coun­try. But the big ques­tion re­mains, is it enough?

The fo­cus on jobs is vi­tally im­por­tant. Peo­ple are at the heart of any busi­ness and wide­spread job losses neg­a­tively af­fect com­mu­ni­ties, lives and fam­i­lies. As the cost of the fur­lough scheme for em­ploy­ers in­creases from the be­gin­ning of next month, busi­nesses are fac­ing tough choices. In­creas­ing core costs with re­duced in­come – or in some cases, no in­come at all – will in­evitably put jobs on the line.

The BCC and the Cham­ber Net­work have al­ready seen young peo­ple bear­ing the brunt of job losses. We called for a com­pre­hen­sive ap­proach to pro­tect­ing ap­pren­tice­ships, sup­port­ing trainee­ships and pre­vent­ing long-term un­em­ploy­ment for a gen­er­a­tion of young peo­ple. The Govern­ment has risen to this chal­lenge and in­tro­duced new ap­proaches to sup­port firms to keep train­ing while nav­i­gat­ing chal­leng­ing times. Crit­i­cal now, is to en­sure these schemes are up and run­ning at light­ning speed, as the aca­demic year comes to an end and school leavers look to the fu­ture.

The fur­lough “bonus” scheme is an in­ter­est­ing in­no­va­tion. But the devil, as ever, will be in the de­tail. How will the scheme pro­tect against the un­in­tended con­se­quences of firms lay­ing off the staff that haven’t been fur­loughed, in­stead of those that have? And if a firm is do­ing well enough to con­tinue to em­ploy pre­vi­ously fur­loughed staff, do they need ex­tra cash, or is that £9bn that would be bet­ter spent else­where? For ex­am­ple, by re­duc­ing em­ployer na­tional in­surance con­tri­bu­tions. Af­ter all, the best way to pro­tect jobs is to lower the over­all cost of em­ploy­ment.

The Chan­cel­lor has also set out to tackle the de­mand chal­lenge.

BCC data show that con­sumer-fac­ing busi­nesses are more likely to report wors­en­ing busi­ness con­di­tions than firms from other sec­tors. Even with the eas­ing of lock­down, foot­fall in our towns and cities has not dra­mat­i­cally in­creased. Peo­ple are still be­ing un­der­stand­ably cau­tious and not re­turn­ing quickly to old habits. The virus is still out there and hav­ing made

‘Even with the eas­ing of lock­down, foot­fall has not dra­mat­i­cally in­creased. Peo­ple are still be­ing cau­tious’

huge fam­ily and per­sonal sac­ri­fices over a num­ber of months in re­sponse to govern­ment mes­sag­ing to stay at home, many con­sumers are con­tin­u­ing to limit their be­hav­iour. And it’s not just fear of the virus. With talk of re­dun­dan­cies and soar­ing un­em­ploy­ment, many peo­ple will be cau­tious about spend­ing.

In our sub­mis­sion to the Trea­sury we called for in­no­va­tive think­ing to stim­u­late de­mand, in­clud­ing the sug­ges­tion of a voucher scheme. While the Chan­cel­lor has re­sponded with a VAT cut for tourism and hos­pi­tal­ity, and a lim­ited dis­count scheme, this is nar­row in scope with parts of the sup­ply chain and other sec­tors very much left out in the cold.

So is it enough? If 2020 has taught us any­thing, it is that it is im­pos­si­ble to pre­dict the fu­ture. But, in all like­li­hood, more will be needed to get busi­nesses back on their feet and to put the UK econ­omy on the road to recovery. The Govern­ment must re­main open to do­ing more, more quickly, to pro­tect liveli­hoods and our na­tion’s fi­nan­cial health, and not sim­ply wait for the Au­tumn State­ment. Even for those busi­nesses that are op­er­at­ing, con­fi­dence is low. BCC re­search shows in­vest­ment in­ten­tions have been hit hard dur­ing the pan­demic, and so the Govern­ment should be pre­par­ing new in­cen­tives. Back in 2018 the An­nual In­vest­ment Al­lowance was ex­panded to £1m to stim­u­late spend­ing in a stag­nant econ­omy in re­sponse to a call from the BCC. Expanding this for a fur­ther two years, and broad­en­ing its scope to in­clude train­ing, tran­si­tion to net zero and spend­ing on Covid-re­lated work­place adap­ta­tions could be the mea­sure that be­gins to un­lock wider spend­ing that leads to growth.

Con­fi­dence is key. Along with these fi­nan­cial in­cen­tives, govern­ment needs to build back pub­lic con­fi­dence else­where. Con­tin­u­ous im­prove­ments to the track and trace scheme, a clearer, more trans­par­ent ap­proach to deal­ing with lo­calised spikes in in­fec­tion rates, and greater clar­ity of mes­sage will all go some way to en­cour­age con­sumers to be­gin to spend again.

Of course, many busi­nesses re­main closed with­out any sense of when they may be able to re­open. The Prime Min­is­ter has promised a road map for the fi­nal phase of re­open­ing and it can­not come soon enough. Busi­nesses like cer­tainty, and they un­der­stand that in the cur­rent cir­cum­stances, any time­line comes with caveats as we con­tinue to mon­i­tor the spread of the virus. But know­ing the ear­li­est point at which a busi­ness can open its doors would boost con­fi­dence and en­able them to start plan­ning.

So it is wel­come progress, but we are on a long jour­ney out of this cri­sis and the Chan­cel­lor may need to put yet more fuel in the tank in the weeks and months ahead if he wants to see the econ­omy re­cover at speed.

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.