Sunak reworks Budget to help firms survive Covid-19 crisis
SUPPLIERS to the public sector could get fast-tracked payments and the taxman may give firms more time to settle debts under Budget measures being considered to ease the pressure of coronavirus on businesses.
Amid fears of a recession, Rishi Sunak, the Chancellor, is drawing up a series of “levers” to provide targeted support for companies hit by the impact of staff shortages during a potential epidemic.
Measures to deal with cash flow at times of national crises have been used before to help small firms.
Last year ministers introduced a Prompt Payment Code to encourage businesses to pay bills within 30 days.
Officials made clear that no decisions had been made and a number of options were on the table before Wednesdays’ Budget.
One source said: “At the Budget the Chancellor will update people both on the assessment of the situation and on different possible scenarios. The key point is that we will be prepared for all of them and he will also outline the kinds of action he might take were those risks to materialise.”
Smaller companies already under pressure from Brexit and wider economic uncertainty are being further strained by the spread of the disease.
There are concerns that, as cash flow becomes paralysed, tax demands could force some companies to go under.
Tej Parikh, chief economist at the Institute of Directors, said the Government’s Time To Pay scheme which helps firms and individuals if they fall behind on their tax should be extended.
He said: “The focus will be alleviating cash flow challenges and the first lever Government can pull is being more lenient around payment deadlines for tax – whether VAT, PAYE, or corporation tax.”
Business groups have asked ministers for a range of measures, including strengthening the Prompt Payment Code, creating a “hardship fund” for small and medium-sized enterprises and wage support for companies which are unable to deliver on public service contracts because of state-imposed restrictions.
The British Chambers of Commerce is calling for a one-year discount on business rates, giving companies the financial headroom to recover from the impact of the coronavirus.
Staff having to isolate themselves because of infection fears pose a particular risk to smaller firms, according to the Federation for Small Businesses.
Mike Cherry, the federation’s chairman, called for the reintroduction of a statutory sick pay (SSP) rebate for smaller companies.
He said: “We’ve seen examples of small businesses almost going to the wall because they’ve had staff suffering long-term sickness absences and are then not able to reclaim the cost of SSP. The Government needs to recognise that if it wants to make SSP terms more generous, small firms need financial support to deliver them.”
Makeuk, the trade body representing Britain’s manufacturing sector, is joining Unite, the trade union, to ask the Government to consider copying Germany’s “Kurzarbreit” working support scheme. This protects vital manufacturing skills where employers are forced to reduce working hours in times of economic hardship.
Instead of firms laying off staff or risking them seeking other jobs that could see their expertise lost, the state subsidises a portion of wages in manufacturing roles. Employers pay wages for the actual hours worked, with the state topping that up during “down time”, which is then used for training.
Mr Johnson yesterday pledged a further £46 million from the UK’S aid budget for research into a coronavirus vaccine and rapid diagnostic tests.
The Prime Minister announced the funding during a tour of a Mologic, a Bedfordshire laboratory where scientists are working on a quick and cheap way to diagnose the disease.
There is currently no vaccine available to protect people against Covid-19, but Mr Johnson said he hoped one will be ready in about a year.
He said developing a vaccine or rapid test for the virus would be “life changing and life saving”.
Speaking after the visit Mr Johnson added: “If we can get a test kit, of the kind they are producing here, in the next few months, in a realistic timescale... if we can get a vaccine as well, then humanity is going to push back the legions of disease thanks to breakthroughs taking place here.”
Prof Chris Whitty, England’s Chief Medical Officer, has previously said the UK “will not have a vaccine available for the first wave” of a pandemic, but that it is still important to develop one for the future.
Supported by UK funding, eight potential vaccines are under development and could be tested on humans later this year.
Public Health England has developed methods of testing for coronavirus, but more rapid tests are needed as these currently rely on samples being sent to a lab.
The package announced by Mr Johnson comes under the “research” phase of the Government’s “battle plan” to contain, delay, mitigate and investigate coronavirus.
Downing Street said the UK’S investment into Covid-19 vaccine research is now worth £65 million – rising to £91 million in total for international work to stop the spread of the virus.
Any rapid diagnostic test could also be sent to other countries which have no lab capabilities or poor medical facilities.
To ensure access to the technology, the test will therefore be jointly manufactured in the UK and Senegal.
‘To help alleviate cash flow challenges the first lever Government can pull is being more lenient on payment deadlines for tax’