Don’t stifle the green shoots of recovery

Tomorrow’s UK Budget, comes at a period of flux for Northern Ireland and, indeed, the whole United Kingdom.

With a vaccine programme advancing at pace, the outlook for late spring and summer is now looking hopeful, however, only when the storm subsides will we be in a position to survey the damage which has been left.

Therefore, the message from small businesses to the Chancellor of the Exchequer, Rishi Sunak, is to keep firms on stabilisers for a while longer, until they are able to move forward unaided. The need to protect jobs should be the priority, so the current deadline of the end of April for the Job Retention Scheme to draw to a close is not fit for purpose, given that many businesses will continue to be restricted or face artificially reduced demand after this point. An extension to furlough is required, for what should be the final stage of restrictions, if the Job Retention Scheme is to serve its original purpose of avoiding mass unemployment.

Businesses have also been reporting the difficulty of meeting the ongoing costs of placing employees on furlough, with Employer’s National Insurance, Pension Costs, and the accrual of holiday pay meaning that the additional cost to the business is around 20% of the total cost of employment. The reinstatement of the previously scrapped Job Retention Bonus would assist businesses with these additional costs and the Chancellor would be well advised to revisit this. With around 106,000 people currently furloughed in Northern Ireland, the stakes are colossal. If these people were to find themselves unemployed because businesses have exhausted their reserves and can no longer meet the on-costs, it would have devastating implications for workers and families right across Northern Ireland, therefore, is vital that the government continues to incentivise businesses to utilise the furlough scheme. Continued support for the self-employed is also crucial as they, too, are impacted by an incredibly difficult economic climate. While the Chancellor will set out the terms of the fourth grant under the Self-Employment Income Support Scheme, he should also consider further support for this sector, matching the duration of support provided to employees.

With government borrowing at historic levels due to the significant support packages introduced during the pandemic, the Chancellor may be tempted to seek to increase taxes. This is not the time to tighten the belt, and nothing should be done to increase the cost of employment or of doing business. A short-sighted increase in National Insurance Contributions for employers or for the self-employed now would impact negatively on the public finances in the long-run, with fewer jobs created and less incentive for people to start their own business, to innovate, and to grow.

Extending support for the hospitality sector, which have borne the economic brunt of the pandemic, should also be on the agenda. While the temporary reduction of VAT to 5% for hospitality and tourism has been very welcome, its impact has been muted because of the restrictions the sector has had to endure. With this temporary relief due to run out at the end of March, the Chancellor should extend the reduced rate of VAT and also ensure that the broadest range of tourism and hospitality businesses can benefit from it, including ‘experience only’ providers, who have so far been excluded.

While rates are a devolved matter, meaning that whatever policy the Chancellor sets out will apply to England only, whatever he announces is likely to set the framework for the direction of travel in other parts of the UK. If 100% relief for 2021/22 is granted to the most impacted sectors, the ‘Barnet Consequentials’ will mean that the Northern Ireland Executive will have more fiscal firepower to give suitable relief to NI businesses. Given the struggles that many businesses with physical, public-facing premises have experienced, it is a matter of fairness that a prohibitive rate bill is not levied against them as they struggle to get back on their feet.

If managed poorly this Budget could, like a late spring frost, burn off or stunt the green shoots of recovery before their full potential is realised, ruining the opportunity of a good harvest later. This will be particularly so if support is hastily withdrawn and burdens increased on businesses, however, if managed correctly, the Budget could provide the platform for a spring of hope, where pent-up demand is released in the economy and businesses prosper from the great advancements in public health. After a particularly long winter, we could all do with basking in the summer sunshine.

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