Labour has called on the chancellor to extend the government’s emergency support for hard-pressed companies after warning that businesses face a £50bn hit in April when financial help is withdrawn.
With the budget less than a month away, the opposition called on Rishi Sunak to announce a six-month extension of the business rates holiday for retail, hospitality and leisure and to continue the temporary cut in VAT to 5% for the same three sectors of the economy.
Labour, which has already called for an indefinite extension of the furlough, said economic support had failed to keep pace with the tougher social distancing regulations introduced to curb the second wave of the Covid-19 pandemic.
The party added that an estimated 1 million food and accommodation businesses had cash reserves that would last for less than three months, and that many were expecting to be closed in April and beyond, with a loss of trade into the summer.
Lucy Powell, Labour’s shadow business and consumers minister, said: “The government’s failure to ensure that economic support is adequate and goes hand in hand with public health measures has meant we’ve seen the worst recession of any major economy and the worst growth.
“The £50bn business bombshell firms face must be defused before it blows a hole in our economy. We need a smarter furlough scheme, and better support for businesses, to secure jobs and get Britain on the road to recovery.”
Labour said that the extra costs facing businesses from April included:
£34bn in VAT deferrals affecting over a quarter of businesses (26% or 600,000 firms).
£9.6bn in business rate payments for 2021-22 that high-street firms will be liable for when the business rate holiday ends.
£3.3bn monthly support through the coronavirus job retention scheme.
Sunak is working on plans to support the economy as it emerges from lockdown. With restrictions expected to be eased slowly, the chancellor will defer long-term tax and spending decisions in his 3 March package and will further extend wage subsidies beyond the current end-of-April deadline.
Labour urges Sunak to extend Covid support for businesses