The British Chambers of Commerce (BCC) has joined calls for an immediate emergency budget to help small businesses to combat rising costs.
Rising energy costs, increases in National Insurance Contributions (NICs) and Minimum Living Wages as well as supply chain issues are putting pressure on small UK businesses.
The relentless financial pressure businesses have faced since the start of the pandemic has already increased the number of businesses in critical distress by 19%. And with inflation expected to rise over 10% by the end of this year, the Bank of England is warning of a recession.
And the newest GDP figures show that the UK economy has shrunk by 0.1% in March as a result of mounting costs.
Who Is Calling For An Immediate Emergency Budget?
Since the Covid relief support has ended, many businesses have called on the government for more support.
Rising energy and fuel prices and inflation, which has been exacerbated by the war in Ukraine, and the resulting cost of living crisis, have squeezed household and business budgets alike.
This has prompted calls for an immediate emergency budget by members of the opposition parties, such as the Shadow Chancellor.
They should bring in an Emergency Budget urgently, with a one-off windfall tax on oil and gas producer profits we can cut household bills by up to £600 and support businesses through the cost of living storm.Rachel Reeves, Shadow Chancellor
This opinion is also shared by the Liberal Democrats, who criticised the Government’s handling of the cost of living crisis and called for immediate help for families.
The Confederation of British Industry (CBI) also wants the Government to help businesses now, rather than delaying any support until the autumn budget. Even if the Director-General of the CBI is not sure if an emergency budget would be necessary.
BCC Proposes 3-Point Plan
To help businesses to manage the cost crisis they face, the BCC wants the Government to take three steps, which it outlined in an action plan.
They believe that if the UK Government were to implement their 3-point action plan, it would help to contain rising costs, increase productivity and alleviate financial pressures.
Postponing The Rise In NICs
The first measure the BCC is proposing is the postponement of the rise of National Insurance Contributions. In April, these have risen by 1.25%, increasing costs for many businesses.
While the Chancellor did soften the blow of this tax rise, when he announced in the Spring Statement that the Employment Allowance would be increased by £1,000 to £5,000, this has been criticised for not being enough.
The BCC believes that this measure would not only alleviate the financial pressures of businesses, but also help employees. With many people having reduced their spending to cope with rising costs, this measure would leave them with more cash in their pockets and increase their spending power.
The costs crises facing firms and people in the street are two sides of the same coin. If we can ease the pressure on businesses then they can keep a lid on the price rises being driven by surging energy bills, staff shortages and higher taxes.Shevaun Haviland, Director-General of the BCC
This would strengthen the economy and give businesses a better chance to cope with the increased taxes at a later date.
5% VAT Cut On Business Energy Bills
The emergency budget should also include a cut in VAT on business energy bills, according to the BCC.
With 36% of businesses saying their energy costs have increased in the past year, a cut in VAT from 20% to 5% would bring down costs for businesses considerably.
Especially, as businesses are not covered by the energy price cap, which keeps a tap on energy prices for households. This means, there is no limit on how much energy prices can rise for businesses.
A reduction of 15% would give businesses a quick financial boost, bringing down costs to a more manageable level.
Bring Back Free Testing
According to a survey conducted by the BCC in April, two thirds of businesses said they have staff absences due to Covid symptoms or self-isolation. Staff absences mean that many businesses are unable to run at capacity.
Therefore, the BCC wants the Government to bring back free testing as part of an immediate emergency budget. This would help businesses to limit the spread and keep staff absences to a minimum.
This is especially important, according to the BCC, because the emergence of new sub-variants of Omicron has caused a surge in cases in the US and South Africa. And it is only a matter of time for this new sub-variant to arrive in the UK.
The BCC believes that an emergency budget that includes these three points would support businesses through these difficult times and help the UK economy to recover.