Ideally today’s Budget Statement from Chancellor Rishi Sunak would put the finishing touches to a comprehensive plan for economic recovery alongside the reopening plans we heard last week.
But the relatively hostile business reaction to the cautious plans laid out by the First Minister demonstrated that the most exposed sectors in hospitality, tourism, retail, personal services and aviation remain gloomily uncertain about what shape reopening in Scotland will take.
The Scottish road map stretches no further than April and leaves us in some form of locally tiered system beyond that. It will be more difficult therefore to judge whether the Chancellor has gone far enough to avoid a messy exit from the business support programmes that so many companies – and the jobs they support – have relied upon to survive.
We should expect to see the job support scheme extended beyond its current April deadline. The British Chambers of Commerce has called for an extension to at least the end of July or until a full reopening of the economy is possible.
With the Prime Minister’s road map, something resembling a full reopening might be set for June in England but there are still uncertainties around the return to the office and the status of international travel. Reviews are set to clarify those issues in England before summer but if there are continuing restrictions then businesses dependent on office-related footfall in city centres, and those in our travel industry, will need support maintained.
In Scotland the nightmare scenario would be an end to JRS before we have left the tiering system behind. It is a stretch to believe the Chancellor will extend JRS on different terms for different parts of the UK so the survival of damaged businesses depends on the First Minister’s suggestion that Scotland would likely be opening up on broadly similar terms to the rest of the UK. The sooner that is fleshed out the better.
The BCC has also argued for the extension of business rates relief until the end of the 2021/22 financial year and here the Scottish Government has been more responsive with Kate Forbes confirming full relief for hospitality, leisure, retail and aviation. Presumably a similar commitment by the Chancellor will release more funds for the Scottish Government to deploy in supporting businesses that are closed or severely constrained by lockdown restrictions.
The BCC has also asked for a further round of upfront cash grant support of around £25,000 and Treasury briefing over the weekend indicates something close to that is coming.
We will also be looking out for additional measures to avoid cash flow cliff edges. The deferral of VAT until at least the end of 2021 and ensuring there are instalment payment plans thereafter would be one measure, as would a temporary reduction in employer national insurance contributions.
The discussion of longer-term strategies for recovery has focused on possible tax increases to tackle the national debt with corporation tax heading the list. That would lend even more weight to BCC proposals that annual investment allowances are expanded and that a review of the broken business rates system is urgently needed.
The crisis has hammered business investment with the BCC Q4 survey showing that for three quarters in a row investment was at the lowest level the survey had ever seen. With many smaller businesses also hampered by very heavy debt we need a radical approach to rebuild balance sheets and encourage investment. The Chancellor’s Budget Statement is usually listened to very carefully in the business community but very rarely have so many businesses depended on it for their very existence.
Stuart Patrick is the chief executive of Glasgow Chamber of Commerce
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