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Summary
- Ailing British businesses could get a £50-bn hit in April if the ongoing financial support is withdrawn.
- One million food and hospitality firms are struggling to survive with cash reserves to last for not more than a period of three months.
The Labour party has urged Chancellor of the Exchequer Rishi Sunak to extend the support for ailing companies after March, when much of it is slated to expire. The party has warned that businesses could face a £50-billion hit in April if the ongoing aid is withdrawn.
The opposition wants the government to extend the business rate holiday for another six months for the leisure, hospitality, and retail sectors. It has also asked for a continuation of the temporary VAT cut to 5 per cent for these sectors. Nearly 1 million food and hospitality firms are on the verge of a collapse, having cash reserves to last merely for a maximum of three months, the party has said.
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Earlier, Labour had called for an indefinite extension of the furlough scheme and had blamed the government for not providing enough financial support to keep pace with tough coronavirus-related restrictions.
Lucy Powell, Shadow minister for business and consumers, Labour party, said that the UK government has failed to provide adequate economic support to struggling companies, leading to the worst recession for any leading economy.
The £50-bn blow
The £50-billion punch will have a devastating impact on the already slow-moving British economy and must be prevented at any cost, the Labour has cautioned. In fact, the extra costs that would be added to firms’ bill from April would have VAT deferrals for £34 billion, business rate payments of £9.6 billion, and £3.3 billion worth of job retention support.
So, the opposition is requesting for not just a better business aid, but also more jobs and an apt furlough support.
Sunak’s team is working on new plans to further support the UK economy as it reels under yet another lockdown. As the restrictions are likely to get eased at a slower pace, the chancellor has deferred long-term taxation and expenditure decisions to his 3 March budget package. He is expected to extend the wage subsidies beyond the end of April deadline.
Other warnings
Prominent thinktank National Institute of Economic and Social Research has also warned Sunak not to announce any tax hikes in the coming budget. Media reports have suggested that Sunak might start to repair the public finances from this year’s budget itself by raising taxes and pulling down the high expenses.
But NIESR has insisted that Sunak should hold any tax hikes until there were any clear signs of economic strength. Instead, the government should focus on gradual income tax push rather than aiming at taxing the businesses.
The thinktank said that the British economy is struggling more than earlier expected due to the lockdowns. These shocks could result into 2.5 million job losses by the end of this year unless the government offers additional employment support.
