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Firms cannot wait until budget for more Covid help, Rishi Sunak told

Larry Elliott Economics editor
·3-min read
<span>Photograph: Toby Melville/Reuters</span>
Photograph: Toby Melville/Reuters

The UK’s leading employers’ organisation has warned Rishi Sunak that businesses running short of cash and resilience cannot afford to wait six weeks for the budget to secure more financial help from the government.

Tony Danker, the director-general of the CBI, called on the chancellor to extend the furlough scheme, defer VAT payments and resist the temptation to raise business taxes as a way of plugging the UK’s record peacetime budget deficit.

Related: UK supermarkets face more inspections over Covid-19 compliance

In its budget submission to the chancellor, the CBI called for an immediate £7.6bn injection from the Treasury as part of a £17.9bn package designed to see the economy through lockdown, stimulate investment over the coming year and prepare the UK for the challenges of the coming decade.

“The budget comes at a crucial time for the UK. The government’s support from the very start of this crisis has protected many jobs and livelihoods, and progress on the vaccine rollout brings real cause for optimism,” Danker said.

“But almost a year of disrupted demand and extensive restrictions to company operations is taking its toll. Staff morale has taken a hit. And business resilience has hit a sobering new low.”

The newly appointed head of the CBI said he thought there was a strong chance that the chancellor would respond to the call for:

  • A £6bn extension of the furlough scheme – which subsidises the wages of temporarily laid-off workers – beyond its planned end in April to the end of June and further targeted support to protect jobs subsequently.

  • Lengthening repayment periods for existing VAT deferrals until June 2021 at the earliest and allow firms to defer VAT bills for the first quarter of 2021 for 12 months.

  • An extension of the business rates holiday for at least another three months to those UK firms forced to close under current restrictions and expanding relief to their supply chains.

Danker said firms tended to make plans at the start of the calendar year and were making key calls about jobs, premises and investment now. He said he thought Sunak would listen to the growing clamour from business. “If you want to have effective policy I don’t think you can wait until 3 March [budget day]. Firms are not going to wait until 3 March before making decisions.”

Sunak and Boris Johnson spoke to 30 business leaders – including Danker – on Monday at the first meeting of the government’s Build Back Better Council, which is part of the effort to speed up the recovery after the pandemic. The chancellor is also setting up a “better regulation committee” to review regulation in Britain now the country is outside the EU, to try to better stimulate growth and attract new investment.

Danker said the CBI was interested in smarter regulation that prompted higher investment but stressed that the immediate priority was to prevent an over-rapid withdrawal of government support that would result in businesses going under.

“Business support needs to go in parallel with the tiering of restrictions. We are not going to have an overnight opening up of the economy, so it would be wrong to end support for business overnight.”

Asked to comment on reports that Sunak was planning to announce an increase in corporation tax – currently levied at a main rate of 19% – in the Budget, Danker said: “It would be wrong to raise business taxes when we don’t have a recovery. It’s as simple as that.”

The chancellor has insisted that the government must eventually take steps to reduce its budget deficit – the gap between tax income and government spending – which is on course to reach about £400bn in the current 2020-21 financial year.

Danker said the chancellor should be “hugely cautious”, adding: “The government can’t have enough certainty about the next six months to have a business tax increase in the next year.”