Yahoo Finance Can he fix it? The claims from UK plc on Rishi Sunak’s Budget 2021 purse-strings
When Rishi Sunak steps up to the despatch box on Wednesday, he will have the competing claims of British industry ringing in his ears.
From extending furlough and rates holidays to cutting VAT and extending the stamp duty holiday, here we round up the central demands and requests from Britain’s key sectors.
Banking
Banks will certainly be impacted by what the Chancellor has to say on Wednesday.
Whatever he does to support the housing market is good for banks, since it will boost prices and thereby cut bank losses on bad loans and probably increase profit margins.
Banks have benefitted enormously from government generosity in terms of guarantees on bounce-back loans, so there is a chance Rishi Sunak will decide banks are ripe for pay back.
There has been some talk of a windfall tax on the banks, but that seems premature since we don’t know yet what bank losses from Covid are going to be, only that they have set aside many billions for fear of the worst.
A rise in corporation tax would hit banks as much as any other sector of course. Banks would argue that they pay quite enough tax as it is and shareholders hardly want to see returns fall any further.
There might be a sop to the small banks here, perhaps excluding then from the “UK banks corporation tax surcharge”, so they can keep lending to support the economy.
Leisure
The leisure sector has been hit hard by the latest lockdown. Gym bosses have been campaigning for months to be allocated the 5% VAT relief hospitality was given, and will be looking for this in the Budget.
Last week the chiefs of some of Britain’s top gym chains warned that the fitness industry is at a crossroads, and said that a “day of reckoning” is coming as the rent moratorium ends. The measure is expected to cease by the end of June, according to the FT.
Bosses will be looking for any change to the current end date, as well as an extension to the business rates relief.
The British Property Federation estimates total rent unpaid for UK commercial property between late March 2020 and the end of June 2021 will be up to £7 billion, if the moratorium is extended and the current rate of rent non-payment continues.
Public transport
The Go-Ahead Group, one of the UK’s biggest operators which runs thousands of routes across London, today issued a five-point plea to get Britain moving again.It wants:
· a Budget for growth, saying re-opening the economy should take precedence over any increase in Corporation Tax
· incentives for people to use public transport, rather than cars as the economy reopens, in order to improve air quality and support public health. These would include a levy on workplace parking, a scrappage scheme for second cars and mobility credits (which provide people with a ‘budget’ to spend on things like public transport or cycle hire)
· A new financial model to help businesses transition to low-carbon technology – for example, to support the investment needed to switch from diesel to electric buses – as the country strives to meet its net zero carbon target by 2050
· As more vehicles of all types transition to electric, the Government ought to shift from duties on fuel to pricing road use. As well as providing sustainable revenue, this could reduce congestion and improve air quality in our cities and towns.
· We welcome signs that the Government may provide enhanced support for apprenticeships – Go-Ahead plans to take on 1,100 bus and rail trainees this year.
TfL has also seen its finance battered by the pandemic.
A spokeswoman for the Mayor of London said: “It is vital the Government use the Budget to support the future of our transport network – which is not only central to our capital, as people begin to return to offices and attractions when it is safe to do so, but the whole country.
“A fair funding settlement for 2021/22 addressing the huge loss of fares income, and a new funding model that does not rely so significantly on fares, are essential to keep transport services running and allow TfL to operate beyond the short term.
“Ministers must also provide capital funding for transport priorities which are key to supporting the recovery not just of London, but of the wider UK economy through TfL’s supply chain – allowing TfL to enter into new contracts and progress with major projects to support the economy.”
Hospitality
Sunak is under pressure from business leaders from across the hospitality, leisure and cultural sectors to use the Budget to offer longer-term certainty to bosses, and help the sectors recover, by extending support schemes including business rates relief and VAT cuts into 2022.
UKHospitality boss Kate Nicholls has written to Rishi Sunak to ask for the VAT cut to 5% for hospitality to be extended for a further 12 months across all parts of the industry, and to enact a further business rates holiday for the 2021/22 year.
The Confederation of British Industry has also written to the Chancellor asking for the furlough scheme and business rates holiday to be extended.
It said that SMEs are keeping a close eye on any tax rises, and urged the Chancellor to create vouchers to get firms investing in digital technologies; to unlock investment in training by reforming the Apprenticeship Levy; and to set up a new National Infrastructure Bank to crowd-in investment.
On Monday more than 80 MPs from across the political spectrum called for additional support for the sector to be announced in the Budget.
The letter from the All Party Paliamentary Group (APPG) for hospitality and tourism asked the Chancellor to “provide improved loan repayment terms and HMRC tax deferrals to give businesses more breathing room to recover”. It also called for the VAT cut to 5% to be extended to alcoholic drinks sold on-premise, the leisure sector and weddings.
Retail
The British Retail Consortium believes action on rates, rents and grants is crucial to the recovery of ‘non-essential’ retailers and the wider economy.
Like the hospitality sector, retailers are hoping to see a rumoured extension to the business rates holiday be confirmed by Sunak. Longer term they want to see wider reform of the business rates system.
High street companies will also be waiting to hear if the furlough scheme will be extended.
One thing a number of companies may be benefit from is a new £5bn Restart Grant scheme as the economy reopens. The initiative could we worth up to £6,000 per premises to help non-essential retailers reopen and trade safely.
Property
Looking at the residential sector, estate agents and housebuilders should be boosted by any government measures that encourage buying.
There have been rumours the stamp duty holiday, due to finish at the March, will be extended by three months. That would give people more time to complete deals or some buyers a chance to try and quickly agree a new purchase.
The Chancellor is expected to announce a mortgage guarantee scheme to help buyers with a 5% deposit get on the property ladder. That would help those looking to buy a house of up to £600,000.
Under the move, the government will offer lenders the guarantee they need to provide mortgages that cover the other 95%.
The scheme will be available to lenders from April, and is designed to increase the appetite of mortgage lenders to offer high loan-to-value lending to creditworthy customers across the UK. Shares in housebuilders leapt today, with investors looking encouraged ahead of the Budget.
For the commercial property sector, landlords will want to hear any update on whether the business rates holiday will be extended beyond March.
There was a recent Financial Times report that a ban on business evictions could be extended, which would be welcomed by many high street brands, but leave landlords unimpressed.
International travel
The aviation sector has been one of the most badly hit across the economy with borders shut and planes grounded, and May 17 the earliest date that the UK could lift its ban on non-essential international travel.
The airports and airlines have joined voices to call for a safe re-start, with the introduction of mutually recognised testing standards to speed re-opening of travel corridors.
Heathrow boss John Holland-Kaye has said the chancellor needs to extend the furlough scheme and give airports business rates relief if the operator is to begin to turn round the £2 billion losses it racked up last year.
He also urged the prime minister to lead the way in striking accords with G7 nations to enable the reintroduction of long-haul flights.
As it clocked in record losses last week British Airways-owner IAG also called for the introduction of digital passports.
CEO Luis Gallego said: “We know there is pent-up demand for travel and people want to fly. Vaccinations are progressing well and global infections are going in the right direction.
“We’re calling for international common testing standards and the introduction of digital health passes to reopen our skies safely.”
Music and culture
Live music, theatre and events industry leaders have begged the Government to extend the 5% VAT relief currently allocated to their ticket sales beyond March 31, saying that ending the relief at this point would have devastating consequences for the UK’s cultural landscape.
Industry body UK Music last week released a "three-point plan" it wants the Chancellor to enact "to guarantee a summer packed with the best of British music".
Their requests include an extension of the furlough and job support schemes, the extension of business rate relief and the 5% VAT rate on ticket sales, ensuring the £1.57 billion Cultural Recovery Fund continues until live music can get back on its feet, and the creation of a "music exports office" to help build on the £2.9 billion the music industry generates in UK exports.
Chief Executive Jamie Njoku-Goodwin said: "We want the Chancellor to use his Budget to deliver the best of British sounds this summer and ensure live music is back to lift our spirits and help drive the post-pandemic recovery.
“Critically, we must have a Government-backed insurance scheme so event organisers can plan with certainty and avoid financial ruin if Covid-19 forces fresh cancellations. With no insurance available, the risk of putting on events in June and July will be too great for many organisers to bear.
“If we fail to follow other governments that are offering insurance schemes to safeguard live music and events, the UK runs the risk of standing at the side of the dance-floor as other nations party through the summer."
Conservative MP Julian Knight, who chairs the Commons’ Digital, Culture, Media and Sport Select Committee, has also called on the Chancellor to extend an underwriting scheme offered to the film and TV industry to the music sector.
Tech
The tech sector is one of the few not battered by the pandemic - but the sector still has a lot to look out for in the Budget.
The Chancellor is expected to announce the launch of a new initiative called Future Fund: Breakthrough, which would see the Government invest up to £375 million in taxpayers’ money - matched by VC investment - into large and growing UK tech firms.
It follows on from the Chancellor’s Future Fund, which has seen more than £1 billion in Government loans put behind 1,000 UK start-ups since the pandemic hit.
The idea is for the new fund to support the growth of already successful firms, where the initial fund was aimed at stopping small UK start-ups going under during Covid.
The Chancellor is also reportedly to announce an initial £12 billion of capital and £10 billion of government guarantees for the UK Infrastructure Bank, based in the north of England, and a new fast track visa scheme for high-skilled workers the tech sector needs.
Julian David, chief executive of trade organisation techUK, said the Chancellor’s expected moves will “help us [tech sector] to continue to play our part in the UK’s COVID-19 response and recovery”.
He said: “Our tech jobs Barometer has shown that over the course of 2020 nearly a quarter of a million (224,000) jobs were posted in the tech sector.
“However due to a lack of digital skills many of these positions have gone unfilled, resulting in lost opportunities for job creating companies across the U.K....
“The announcement of a new fast track visa scheme demonstrates how the UK can use a new approach to our borders to attract the best global talent and will be welcome news to high growth and innovative companies in the tech sector and beyond.”
