Sunak Revises Budget To Support SMEs During Covid-19 Crisis
Budget measures such as fast-tracking payments for suppliers to the public sector and allowing firms more time to pay taxes are being considered to ease the pressure of coronavirus on businesses.
Rishi Sunak, the Chancellor, is creating a programme of “levers” to support SMEs suffering staff shortages in the event of an epidemic and amid fears of a recession. This will not be the first time that measures to improve cash flow have been used to help small firms at a time of national crisis.
In 2019, ministers introduced a Prompt Payment Code to encourage larger businesses to pay the invoices of SMEs within 30 days. Government officials emphasised that no decisions have yet been taken and that a number of options remain on the table before the Budget on Wednesday.
One source said: “During the Budget, the Chancellor will update the country as to the assessment of the current situation and the various potential scenarios. He will also indicate the courses of action he may take if risks were to emerge, but the crucial point to make is that the Government will be prepared for all eventualities.”
Cash flow problems
The relentless spread of Covid-19 is further stressing smaller companies, already under pressure from Brexit and greater economic uncertainty. There are concerns that tax demands could result in some companies failing as cash flow seizes up.
He said: “The focus should be on tackling cash flow problems and the first lever that could be pulled is creating more leniency around payment deadlines, whether PAYE, VAT or corporation tax.
Business pressure groups have sought a range of measures from ministers, including firming up the Prompt Payment Code, establishing a “hardship fund” for SMEs and wage support for firms unable to deliver on public service contracts owing to state-imposed restrictions.
Greater support for SMEs
The British Chambers of Commerce is urging a one-year discount on business rates which would give smaller firms the financial breathing space to recover from the consequences of the coronavirus.
According to the Federation of Small Businesses, a particular risk to smaller firms would be staff having to self-isolate because of infection fears. Mike Cherry, the federation’s chairman, asked for the reintroduction of a statutory sick pay (SSP) rebate for smaller companies.
He said: “Some small businesses have almost folded because staff have gone on long-term sick leave and the owners have not been able to reclaim the cost of SSP. The Government needs to realise that if it decides to increase SSP terms, small firms will need financial support to pay enhanced benefits.
MakeUK, the trade body representing Britain’s manufacturing sector, is joining forces with Unite, the trade union, to call on the Government to consider implementing Germany’s “Kurzarbeit” (short-time work) scheme. This arrangement protects essential manufacturing skills when employers have to reduce working hours during an economic slowdown.
Further research into vaccine
On Friday, the PM pledged another £46million from the UK’s aid budget for research into instantaneous diagnostic tests and a coronavirus vaccine. There is currently no vaccine available to protect the population against Covid-19, but Mr Johnson said he hoped one that is life saving would be ready in around one year’s time.
Downing Street said the UK’s investment in Covid-19 vaccine research has reached £65million, or £91million in total for international work to prevent the spread of the virus. In future, any fast-acting diagnostic test could be sent to countries lacking laboratory facilities or having poor medical services.
The test will be jointly manufactured in the UK and Senegal, in order to ensure widespread access to the technology.