UK companies facing $68 billion ‘bombshell’ unless aid extended

Bloomberg

UK businesses face a 50 billion-pound ($68 billion) “bombshell” unless a series of government pandemic aid programs are extended, the Labour opposition warned.
With many firms running out of cash, the party urged Chancellor Rishi Sunak not to wait until his budget on March 3 to prolong business rates relief, a sales tax reduction and his flagship furlough program. Labour’s figure is a rough estimate of the extra costs firms will face if the programs expire as scheduled over the next month or two.
“The 50-billion pound business bombshell firms face must be defused before it blows a hole in our economy,” Lucy Powell, a business spokeswoman for the party, said in a statement. “We need a smarter furlough scheme, and better support for businesses, to secure jobs and get Britain on the road to recovery.”
With no prospect of economy even starting to reopen for at least another month, Sunak’s office signalled priority for budget is protecting employment.
Businesses last year deferred 34 billion pounds of value added tax (VAT), which they must now pay the Treasury by March 31, or arrange for repayment in installments. Separately, a reduced rate of VAT for the hospitality and leisure industries also expires at the end of March.
A business rates holiday, estimated to save companies 9.6 billion pounds, expires at the end of the current tax year on April 5. The furlough program, which pays as much as 80% of the wage of employees unable to work because of coronavirus rules, is due to expire at the end of April.
Separately, a cross-party panel of lawmakers urged Sunak to extend a 20 pounds-a-week uplift to the Universal Credit welfare payment by at least a year. The Work and Pensions Committee also said the chancellor should reject proposals to pay a one-time bonus instead of extending the weekly uplift.
The six billion pound-a-year measure comes to an end in April, and Work and Pensions Secretary Therese Coffey has been locked in discussions with chancellor over options including extensions of different lengths.
Scrapping the uplift “would represent a failure by Government – failure to recognise the reality of people struggling,” committee Chairman Stephen Timms said in a statement. “Without regular support, hundreds of thousands of families will be swept into poverty or even destitution.”

UK retail sales fall
England’s third lockdown hit non-essential retailers harder than the previous one in November, with the new variant of the coronavirus hampering spending and confidence last month, according to the British Retail Consortium.
Clothing and footwear stores fared particularly badly as retailers on the whole saw the value of sales decline from a year earlier, the business lobby said. A similar picture emerged in a separate Barclaycard survey, which showed consumer spending falling sharply and Britons more worried about their jobs.
The findings are certain to intensify pressure on Chancellor of the Exchequer Rishi Sunak to use his budget on March 3 to extend tax relief programs designed to help struggling shops and other businesses through the pandemic.
After a year of public restrictions to battle the spread of Covid-19, retailers are pinning their hopes on pent-up savings and a successful vaccine rollout to boost their fortunes. That would help an economy that had its worst slump in three centuries last year.

“If government wants to avoid further administrations of otherwise viable businesses and thousands of jobs losses, it must provide those firms which have been hardest hit with the necessary financial support,” said Helen Dickinson, chief executive of the BRC.
After a year of public restrictions to battle the spread of Covid-19, retailers are pinning their hopes on pent-up savings and a successful vaccine rollout to boost their fortunes. That would help an economy that had its worst slump in three centuries last year.
The diverging fortunes created by the pandemic were on display again in January, with online sales surging and the closure of schools leading parents to buy laptop computers and printers, according to the BRC.
Barclaycard said tougher border controls hit holiday bookings during a month when consumers would typically be taking advantage of summer vacation deals.
Confidence in job security slumped to its lowest level in a more year, with just 40% of Britons saying they were optimistic in their employment prospects, the lender said.