Help extended to protect businesses and support their recovery

Wednesday, 3 March 2021

Commenting on the UK Budget, Alan Mitchell, Chief Executive of Fife Chamber, said: “The announcement that Furlough will be extended, more self-employed workers will receive financial support, the extension of the hospitality 5% VAT rate for six months and the delay of its return to 20% until April 2022, and new restart grants for the businesses hit hardest by closure or restrictions are all very welcome and absolutely necessary. 

“The Chancellor had to do two things in his Budget.  First, make sure that closed or restricted businesses survive until the economy re-opens.  Second, give the ones that do survive the confidence and the capability to get through what will be some very difficult few months of initial trading.  On first glance he appears to have done both, with the new ‘super deduction’ to spur investment a very positive step.

“Of course, we cannot be 100% sure that even this package of support will be enough.  £5bn of restart grants sounds impressive but that will equate to around £500m in Scotland and that will have to be shared across businesses across 32 local authorities.   Employers will struggle to pay 10% of the wages of furloughed staff in July and then 20% in August and September if they aren’t operating at close to capacity.  Will Scottish employers still have to pay the wages share If we are slower out of restrictions than England?  If they do and we are slower out of lockdown, even by a few weeks, that will be a huge burden for them to carry when they can least afford it. 

“We hope that restrictions will largely be gone by late June but the Prime Minister made clear last week that this is not guaranteed and, of course, we didn’t even get that level of forward clarity from the First Minister.  We don’t know how quickly consumer demand will pick up or how confident people will be about venturing back to shops and restaurants and bars and concerts.    It is great  that more self-employed people will now be eligible for support but others have also fallen through the gaps in the last 12 months and their plight continues to be ignored.

“Nor can we ignore the eye-watering levels of borrowing needed to pay for it all or pretend that this won’t have consequences for wallets and purses, company accounts or the provision of public services for many years.  We got a clear indication of what is ahead from the freezing of tax thresholds and higher corporation taxes for the most profitable companies.   

“We cannot borrow ever increasing sums of money but it is necessary now.  If we don’t borrow we cannot give businesses the support they need to survive and restart successfully and that will slow down recovery, which will mean unemployment will stay higher for longer, with all of the adverse health and social consequences that flow from that.  Further borrowing is, quite simply, the lesser of two very big evils confronting us and the Chancellor was right to embrace it.”

The Treasury’s press release can be found here and a full summary can be found here.