Manufacturers are calling for an emergency, pre-recess package of business support measures including extension of temporary tax reliefs to support companies from escalating costs
The call comes on the back of the Make UK/BDO Q2 Manufacturing Outlook survey which shows growth and orders slowing significantly, exports almost at a standstill and, investment falling as companies cut or postpone their plans in order to maintain cashflow.
According to Make UK, the seriousness of the situation and, the prospects for the next six months, means that industry cannot wait for the promised help in the autumn which the Chancellor made in the Spring Statement. It is calling for urgent actions before MPs go on their summer break.
Make UK has made a number of recommendations for measures government can introduce now to address rising business costs including the following:
- waive or reduce business rates for the next 12 months;
- implement VAT deferrals for larger businesses and waive completely for SMEs;
- temporarily freeze the Climate Change Levy and, if energy costs continue to rise, remove it completely;
- Review the efficacy of the business interruption loan schemes introduced during the pandemic and deploy a successor scheme by Q3;
- Extend the 130% super-deduction tax break, due to end in March 2023; and
- make the increase in the Annual Investment Allowance permanent.
In addition to immediate measures, Make UK also stressed that the government must move away from short-term, gesture politics. Instead, it must focus on demonstrating to business and, foreign investors, that it has the capacity to operate in a serious manner with a long-term strategy.
Stephen Phipson, chief executive of Make UK, said: ‘Whilst industry has recovered strongly over the last year we are clearly heading for very stormy waters in the face of eyewatering costs and a difficult international environment.
‘Clearly some of the factors impacting companies are global and cannot be contained by the UK government alone. However, given the rate at which companies are burning through their balance sheets just to survive, it must take immediate measures to help shield companies from the worst impact of escalating costs and help protect jobs.’
Richard Austin, head of manufacturing at BDO, added: ‘Manufacturers have shown their ability to overcome a wave of challenges over the last couple of years to remain competitive. The question is when fatigue will overcome resilience. The tipping point where the shorter term need to retain cash outweighs investment is starting to be reached and could have significant implications for future growth.
‘Rapidly rising input costs, ballooning energy bills and in some cases inflation-busting pay settlements have hit margins and frozen investment plans. There is now a strong case for government action to help UK manufacturers weather the immediate storm and incentivise investment for long-term growth.’
According to the survey, investment intentions dropped sharply from +27% in Q1 to just +5% as companies cut or postpone their plans in response to rapidly escalating costs.
Two thirds of companies (67.8%) said rising energy costs were causing major disruption, almost three quarters (71.9%) cited increased raw material costs posing a similar threat and, two thirds (66.8%) cited rising transport costs.
Manufacturers expect to continue to increase their UK and export prices substantially in the next quarter to +69% and 63% respectively, with both these figures dwarfing previous record levels in the survey’s 30-year history.
Chancellor Rishi Sunak sets out the three new Covid support measures available for businesses
Omicron-hit hospitality businesses will be able to claim up to £6,000 cash grants and companies can receive compensation for employees’ sick pay, as part of a new support package, the chancellor has announced.
Rishi Sunak has announced three new “generous” measures to help the arts and hospitality industries get through what should be their busiest period, as restaurants’ bookings plummet and theatres are forced to close amid a sharp increase in Covid cases.
From Tuesday, small and medium-sized companies – those with less than 250 employees – can be reimbursed by the government for the cost of statutory sick pay for Covid-related absences of up to two weeks per employee, said the chancellor.
“Eligible” hospitality and leisure businesses “impacted by Omicron” will be able to apply for a one-off cash grant of up to £6,000, said Mr Sunak. However, it is not yet clear how employers will be asked to prove how they have been affected.
Businesses in the arts will also receive further funding with £30 million allocated to the Culture Recovery Fund to help support the likes of theatres and museums.
What exactly does the new Omicron financial bailout include?
- “Eligible” hospitality and leisure companies can claim one-off cash grants worth up to £6,000 per premises. It is understood that all hospitality and leisure businesses can apply, as long as they can prove they have been “impacted by Omicron”. It is not yet clear how businesses will be asked to prove how they have been impacted.
- Small and medium-sized companies – those with less than 250 employees – can be reimbursed by the government for the cost of statutory sick pay for Covid-related absences for up to two weeks per employee. Firms are eligible for the Statutory Sick Pay Rebate Scheme (SSPRS) from today and will be able to make claims retrospectively from mid-January.
- A £30 million boost to the Culture Recovery Fund to support organisations in the arts, such as theatres, museums and orchestras through the winter until March 2022.
- Local authorities in England will also received a more than £100 million boost via the Additional Restrictions Grant (ARG) . Each local authority will have discretion to allocate this funding to businesses most in need.
As the hospitality industry continues to recover from the pandemic, the Chancellor announced significant discounts on business rates for specific sectors for the next 18 months
Over 90% of retail, hospitality and leisure businesses will receive at least 50% off their business rates bills in 2022-23.
To support local high streets as they adapt and recover from the pandemic, the government is introducing a new temporary business rates relief in England for eligible retail, hospitality and leisure properties for 2022-23, worth almost £1.7bn.
Up to 400,000 retail, hospitality and leisure properties will be eligible for the new, temporary £1.7bn of business rates relief next year. This will provide support until the next revaluation, helping the businesses that make UK high streets and town centres successful evolve and adapt to changing consumer demands.
Apart from reliefs in response to Covid-19, this is the biggest single-year cut to business rates in 30 years.
Chris Sanger, EY head of tax policy, said: ‘The Chancellor announced a number changes to business rates, which fell short of what some had called for. Nevertheless, business rates were cut in half for a further year for those in the retail, hospitality and leisure business, including local pubs. The half price offer for the next year will help, but does not address the long-term issue.’
The government is also freezing the business rates multiplier in 2022-23, a tax cut worth £4.6bn over the next five years. This will support all ratepayers, large and small, meaning bills are 3% lower than without the freeze.
From 2023, a new business rates relief will support investment in property improvements so that no business will face higher business rates bills for 12 months after making qualifying improvements to a property they occupy.
This will enable businesses to make improvements to their premises that support net zero targets, such as installing solar panels, and enhance productivity as employees return to the workplace.
From 2023, the government will introduce exemptions for eligible plant and machinery used in onsite renewable energy generation and storage, and a new 100% relief for eligible heat networks, to support the decarbonisation of buildings.
The government is to extend business rates relief with a £1.5 billion fund targeted at those businesses unable to benefit from the current COVID-19 support.
Retail, hospitality and leisure businesses have not been paying any rates during the pandemic, as part of a 15 month-long relief which runs to the end of June this year.
However, many businesses ineligible for reliefs have been appealing for discounts on their rates bills, arguing the pandemic represented a ‘material change of circumstance’ (MCC).
The government says that market-wide economic changes to property values, such as from COVID-19, can only be properly considered at general rates revaluations, and will therefore be legislating to rule out COVID-19 related MCC appeals.
Instead, the government will provide a £1.5 billion pot across the country that will be distributed according to which sectors have suffered most economically, rather than on the basis of falls in property values. It says this will ensure the support is provided to businesses in England in the fastest and fairest way possible.
Chancellor of the Exchequer Rishi Sunak said:
‘Our priority throughout this crisis has been to protect jobs and livelihoods. Providing this extra support will get cash to businesses who need it most, quickly and fairly.
‘By providing more targeted support than the business rates appeals system, our approach will help protect and support jobs in businesses across the country, providing a further boost as we reopen the economy, emerge from this crisis, and build back better.’
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