Businesses are facing a devastating cliff edge when on 31 March the support made available comes to a sudden end. Chancellor Rishi Sunak in his 3 March Budget should look to introduce a new package of support that tapers off over time giving businesses the opportunity to rebuild and thrive, says accountants, business and financial advisers Kreston Reeves.
Support for businesses that stops on 31 March includes:
- Business rates relief for the retail, leisure and hospitality sectors.
- VAT cuts for hospitality and travel accommodation.
- Government loan schemes.
- The moratorium on commercial landlords evicting tenants.
- The ban on creditor statutory demands and winding up petitions.
Kreston Reeves recommends the Chancellor considers the following.
Review business rates
Business rates have long been a source of frustration, particularly for traditional bricks and mortar retailers who feel penalised for their high street footprints, says Andrew Tate, Partner and Head of Restructuring at Kreston Reeves.
"The recent reform of business rates has proven to be deeply unsatisfactory, highlighted further by the COVID pandemic. The pandemic provides government with a perfect opportunity for a wholesale review of business rates into a more progressive tax that supports bricks and mortar business and our valued high streets."
Debt to government equity
Businesses will have accumulated considerable debt during the COVID pandemic that may hold back businesses for decades to come, says Andrew Tate.
"Banks are, quite naturally, reluctant to swap debt for equity and are in many instances unable to do so, but could government? The Chancellor should be encouraged to explore ways it can take equity in UK businesses, sharing in their future success. A department for enterprise would inevitably create new employment opportunities too."
Many businesses have successfully pivoted, often in very dramatic ways in response to the pandemic, says Andy Wallis, Corporate Tax Partner, Kreston Reeves.
"Whilst the R&D tax credit system already provides generous incentives to businesses involved in scientific or technical advancements, we would encourage the government to go further. There has been much discussion about 'building back greener' and 'digitalising the economy' and further incentives could support this."
We have seen anecdotal evidence of businesses adopting flexible furlough policies, bringing staff back into the office for just one or two days a week, says Andy Wallis. "The government could quite simply maintain a flexible furlough scheme, phasing it out over a six or 12-month window."
CBILS and bounce back loans
CBILS continue to be enormously valuable to businesses, says John Walsham, a Consultant and banking expert at Kreston Reeves.
"Initially offered on six-year terms, the government has said they should be extended to a 10-year term, immediately helping ease cash flow challenges many businesses face. Many banks continue, however, to offer on six-year terms. This needs to change."