Businesses face £50 billion ‘bombshell’ in April as coronavirus support packages end
Labour is today (Tuesday) warning that businesses face a bombshell in April of more than £50 billion which will cost jobs and blow a massive hole in the recovery, as rates holidays, tax deferrals, VAT cuts, the furlough scheme and other government support packages are due to end.
Businesses can’t wait for the Budget for the Chancellor to act. With an estimated 1 million food and accommodation services businesses reporting cash reserves of less than three months, the Party is calling for the Government to immediately announce an extension to the furlough scheme, extend for at least six months the 100% business rates relief for retail, hospitality and leisure businesses, and continue the temporary 5% reduced rate of VAT for the hospitality, tourism and culture sectors.
Labour argues that economic support has failed to keep pace with necessary public health restrictions that have shut down large parts of the economy. Many businesses are now expecting to be closed in April and beyond, with lost trade into the summer.
Using government data, the Party estimates that the extra cost of this bombshell facing firms amounts to more than £50 billion, including:
- £34 billion in VAT deferrals affecting over a quarter of businesses (26% or 600,000 firms)
- £9.6 billion in business rate payments for 2021-22 that high street firms will be liable for when the business rate holiday ends
- £3.3 billion monthly support through the Coronavirus Job Retention scheme
Alongside these costs, firms will have to begin to pay back coronavirus support measures including:
- An estimated £275 million of interest payments on bounce back loans, and CBILs loans, after the Government stops paying the first year of interest for firms
- Loan repayments on the £62 billion in bounce back loans, and CBILs loans taken out by companies since the start of the pandemic
- £4.1 billion cost of the hike in VAT to 20% (from 5%) for the hospitality sector, accommodation and attractions
- Businesses will also have to account for the £9 billion hole from the Job Retention Bonus caused in their finances after the Chancellor scrapped it
Lucy Powell MP, Labour’s Shadow Business and Consumers Minister, said:
“The Government’s failure to ensure economic support is adequate and goes hand in hand with public health measures has meant we’ve seen the worst recession of any major economy and the worst growth.
“The £50 billion business bombshell firms face must be defused before it blows a hole in our economy. We need a smarter furlough scheme, and better support for businesses, to secure jobs and get Britain on the road to recovery.”