Chancellor’s Summer Economic Statement. Business Responds

Jonathan Geldart, Director General of the Institute of Directors, said:

“The Chancellor pulled a few rabbits out of his hat today, but many directors will feel like he missed a trick. We fully understand the Treasury’s desire to focus on the young, and particularly badly-affected sectors, but coronavirus has crippled many parts of the economy.

“The JRS bonus offers something of an off-ramp from the furlough scheme, and firms will certainly be doing all they can to keep people on board. However, with cash so tight now, January may feel like a long way off for some businesses. Meanwhile, the Kickstart Scheme is a welcome idea, and we hope the system will be easy for employers to use. The boosts for apprenticeships and other training are also steps in the right direction.

“Support for hospitality will clearly go down well with the sector. However, we were looking for broader-based measures to help companies ride out the crisis – which is by no means over – particularly for those who have so far fallen through the gaps of support schemes. A glaring omission throughout this pandemic has been the exclusion of small company directors, many of whom have not been able to access income support. Widening grant schemes could help those who have been left struggling without assistance, and help more firms to re-open.

“While boosting green investment marks a welcome step towards our long term goals for the economy, it can only be the start, and we will need much more encouragement to help businesses invest in green and digital technologies. At the same time, with our data showing exports have taken a knock due to the pandemic, it’s essential that sufficient measures are taken soon to aid international traders so we can avoid a perfect storm come the end of the year.

“The Chancellor’s greatest strength has been his willingness to adapt as the situation moves. While there were certainly things for businesses to welcome today, there is still a long hard road back to full economic health.”

Dame Carolyn Fairbairn, CBI Director-General, said:

“The Chancellor is absolutely right to prioritise jobs in his summer statement. Flattening the daunting unemployment curve about to hit our country could not be more important. Joblessness scars lives and hits the young and most disadvantaged hardest.

“Today’s jobs plan is an important step forward. For young people, the Kickstarter Scheme will help create jobs in the short-run that can turn into opportunities for the long-run, and firms look forward to working with government to get it up and running quickly and well. It is also good to see direct support for apprenticeships and careers advice, which will help build the skills as well as the jobs of the future.

“New investment in green growth will spur job creation on the road to net zero, while revitalizing demand through targeted VAT cuts for hospitality, an imaginative voucher scheme and stamp duty relief will be warmly welcomed by many businesses and help give consumers confidence to spend.

“But prevention is better than cure. Many viable firms are facing maximum jeopardy right now. The job retention bonus will help firms protect jobs. But with nearly 70% of firms running low on cash, and three in four reporting lack of demand, more immediate direct support for firms, from grants to further business rates relief, is still urgently needed.

“The Chancellor must continue to balance the need to invest in a long-term, sustainable recovery while responding to the urgent challenges that companies are experiencing today.”

Terry Jones, partner and head of BDO LLP in Yorkshire, said: “The Chancellor has placed a firm focus on jobs and creating employment opportunities for young people.

The 'Kickstart' placement scheme is an interesting way to re-think entry level roles by subsidising work placements for those who are 16-24 in a very challenging jobs market. Individuals will receive around £5,500 from the government over six months and businesses are set to get £1,000 for each placement. When we asked business leaders “what should be the top priority Government spending until 2025?”, 70% agreed that boosting businesses and jobs was where the emphasis should be placed.

“Somewhat conversely, only 2% felt education and training should be prioritised. This suggests that for a work placement scheme and traineeships to be truly effective, businesses will need practical support as well as funding to get the buy-in which will bring its intended benefits to life. It can’t be underestimated the pressure business owners have been under in recent months to protect jobs and their future.

"Many mid-sized businesses are already stretched. Running quality placements and traineeships which add real value is time and resource intensive and the Chancellor is asking businesses to take on as many kickstarters as possible. That said, with the right government support, strengthened links with education and effective regional and cross-sector collaboration, this scheme could be a much-needed intervention for the next generation of employees and the businesses which have the potential to create future jobs.”

Chris Denning, partner at MHA MacIntyre Hudson, said the stamp duty relief measures apply for too short a period to affect construction plans and boost housebuilding.

“The time period of the stamp duty relief announced by the Chancellor, from now until 31 March 2021, is relatively short. It gives little opportunity for house builders to use the reduction to inform strategic decisions on construction plans beyond the next nine months. The current fall in house prices may also encourage people to sit tight until the market recovers and there is huge uncertainty around job security. This policy will likely need extending in order to have real economic impact.”

TUC General Secretary Frances O’Grady said:

“Mass unemployment is now the biggest threat facing the UK, as shown by the thousands of job losses at British Airways, Airbus and elsewhere. The government must do far more to stem the rising tide of redundancies. We can’t afford to lose any more good skilled jobs.

“The chancellor should have announced targeted support for the hardest-hit sectors like manufacturing and aviation. Struggling businesses will need more than a one-off job retention bonus to survive and save jobs in the long-term.

“Unions campaigned for a job guarantee scheme. Kickstart is a good first step. But if the government allows vital industries to go the wall, unemployment will surge and the recession will last far longer.

“The more people we have in decent work, the faster we can work our way out of recession. We must create jobs through more new public investment in new homes, childcare, faster broadband, better transport and green tech.

“The government should have announced extra investment in jobs across all public services – starting with filling the 200,000 vacancies in the NHS and social care. And if the chancellor wants people to have the confidence to eat out, he should have announced a pay rise for hard-pressed key workers rather than dining out discounts for the well-off.”

On sick pay, Frances O'Grady added:

“The government missed an opportunity to strengthen their faltering Test and Trace programme.

“Statutory sick pay is too low for anyone to live on. It’s not viable to ask people to self-isolate if they will be pushed into financial hardship.

“We had hoped ministers would listen, raise the rate and change the rules so low-paid people could afford to do the right thing and comply with self-isolation. Once again, this government fails to understand the real lives of low-paid workers. It is clear that poverty wages and insecure contracts are a public health hazard.”

Alison Horner, indirect tax partner also at MHA MacIntyre Hudson, said businesses need to prepare carefully as quick VAT cuts can cause an administrative tangle: “The emergency VAT cut is great news for travel and tourism but sudden VAT cuts always raise substantial administrative issues. Businesses must get on top of their preparation. In this case any premise serving alcohol will have to re-programme its tills to deal with three different VAT rates: one for alcohol at 20%, one for cold take-away food at 0% and 5% for everything else.

Marvin Rust, Head of Tax at Alvarez & Marsal, commented:

“Businesses have been paralysed by the pandemic, yet the Government has not gone far enough in its efforts to breathe new life into the sectors worst hit . A VAT cut that only applies to the hospitality and tourism sectors ignores industries like retail and aviation that are crying out for additional help. These sectors have been shuttered for months and are struggling with cash flow, paying their rents and retaining employees. A cut to VAT and a national insurance holiday would have been a lifeline for these companies, but now they are forced to go without.”

“Despite the Government’s focus on jobs, without additional measures of support, many sectors will struggle to retain existing staff, let alone bring back all employees from furlough and recruit new colleagues – even with the state bonuses. Although the Chancellor talked about payment for the support over the medium term, he did not deliver the psychological assurance to consumers that there would be no tax rises in Income Tax or VAT in this Parliament.”

“In the past lack of preparation led to disaster. For example, the UK experimented with a VAT cut in response to the 2008 financial crisis which caused chaos for retailers. Some supermarkets were assured by HMRC that altering their prices would take only a few hours, but instead, they spent over a week in a crisis mode.

“Businesses need time to prepare but the Chancellor can’t give them too much time, or the anticipation of lower prices will lead to a slump in demand. The Chancellor was probably right to pick Wednesday 15 July as the date to introduce the cut; it hopefully gives business just long enough to sort this out.”

The chief executive of Leeds-based housing association Unity Homes and Enterprise has expressed his disappointment that Chancellor of the Exchequer Rishi Sunak did not include renewed investment in genuinely affordable homes in the Government’s package of economic measures announced today.

He said: “The Chancellor had the chance to place a new house-building programme at the heart of the Government’s pandemic recovery plan, but he failed to take it.

“The housing association sector has never been shy in calling on successive Governments to tackle the national housing crisis by building the many genuinely affordable homes the country needs.

“Given his desire to keep people in work and create more jobs in the wake of the economic damage inflicted by Covid-19, the timing was never more appropriate than now.

“It was a golden opportunity that the Chancellor has wasted.”

John Longworth, Chairman of the Independent Business Network and Foundation for Independence, has said:

"The Chancellor’s statement is underwhelming. Having first deployed taxpayer funds to bribe able workers to have an extended holiday, money is now being used for an unsustainable scheme to coax employers into taking people back to work.

"Instead of prioritising the family owned and run businesses that constitute 85 per cent of of the economy, once again it’s the big multinationals that have set the agenda and won out.

"Where were the measures to rescue the high-street, which was already mired by trading difficulty even before the virus struck? What high street businesses up and down the country really need is a VAT differential to help them compete with online retailers like Amazon.

"The Government needs to adopt a much broader borrowing programme matched with a more creative programme that would have include a broad tax-cutting agenda for the betterment of both businesses, consumers and the wider economy.

"Infrastructure investment is also urgently needed. Roads needs to be improved, planning laws liberalised, and a comprehensive digital connectivity programme put in place that doesn’t place China at the heart of the delivery plan.

"In terms of the plans to create jobs for young people, the Chancellor doesn’t seem to appreciate that the creation of these jobs relies on the engagement of entrepreneurs. If those entrepreneurs being asked to create those jobs can’t sustain their businesses then the project is fruitless.

"The British economy urgently needs a bold creative approach from the Chancellor. Sadly, that wasn’t on the menu today."
LGA RESPONDS SUMMER ECONOMIC UPDATE

Responding to the Summer Economic Update announced by the Chancellor, Cllr James Jamieson, Chairman of the Local Government Association, said:

“The social and economic challenge we face as a nation cannot be underestimated. We are pleased that the Chancellor has acted on council calls by announcing investment in skills, creating jobs, apprenticeships and opportunities for young people. Councils have also been leading calls for a green recovery so initiatives, such as social housing decarbonisation and a focus on green jobs, are also encouraging steps.

“Councils are deeply concerned about local economic decline and rising unemployment. Locally led action will be key if every part of the country is to bounce back from this economic shock. Councils want to work with the Government on how to best target increased national investment to help young people and adults secure jobs and get millions of people back into work.

“With the potential for more than a million young people not in education, employment or training this September, the scale of the challenge facing our young people is enormous. A six-month placement scheme for those facing long term unemployment is positive and this needs to be available immediately, as many were furloughed or lost their jobs or apprenticeships almost four months ago.

“Our recent research found a million green jobs could be created in England by 2050 as the nation transitions to a net zero economy. Localising and devolving skills investment, back to work support and a job guarantee is critical so councils, which are driving the climate change agenda locally, can work with businesses and education providers to ensure everyone benefits from this expected demand for green jobs. We also want to work with government, employers and providers to create green apprenticeship opportunities for young people as part of this green investment package.

“While the measures announced today are positive, there is also unfinished business when it comes to fully supporting councils and some sectors. Councils continue to lead local areas through this crisis and are committed to working with the Government to help communities, but further measures are needed to fully address the severe financial challenges they face as a result. It is also vital that the Government develops a package of support for swimming pool and leisure centre providers if we are to ensure that communities do not see their cherished facilities close forever.

“The next six months have the potential to shape the direction of this country for years to come. With full funding and the right powers, councils can grasp the opportunity to not just recover from this pandemic but to go further and address the stark inequalities the virus has exposed, develop a green recovery, address skills gaps and rebuild the economy so that it benefits everyone.”

ENDS