Rishi Sunak is coming under renewed pressure to provide more financial support to businesses across the UK, as official figures are expected to confirm the UK has slumped into a double-dip recession.
The British Chambers of Commerce (BCC) said the chancellor needed to launch a new package of cash grants, and extend and expand a range of tax cuts to help businesses struggling to stay afloat while tougher coronavirus restrictions were in place.
Calling for immediate action, the business lobby group said firms could not afford to wait until the budget on 3 March, which Sunak has indicated will be the next date when he refreshes the government’s pandemic response.
Figures from the Office for National Statistics are expected to show the UK economy crashed again in November, when Boris Johnson staged a last-minute decision to impose a second English lockdown to contain rapid growth in Covid infections.
City economists are forecasting a 5.7% fall in gross domestic product (GDP) from a month earlier, ending six successive months of growth in the summer as rising infections and tougher restrictions across the UK pushed the economy into a double-dip recession.
GDP fell by 19% in the second quarter during the first national lockdown – the biggest decline in history.
The impact this time is expected to be felt most by the embattled hospitality sector. Pubs, restaurants and cafes were forced to close or operate as takeaway-only during the second lockdown in England, while more non-essential shops remained open than during the first, and manufacturing and construction activity continued.
Britain’s biggest pub and restaurant groups recorded a 72.6% drop in sales over the pivotal Christmas period, according to figures published on Friday by the Coffer Peach business tracker, in what should have been the sector’s most profitable time of year.
Trading figures for the five weeks to 3 January showed drink-led pubs and bars were worst hit, with total sales down by more than 80% on the same period a year ago. London, which had been largely open at the beginning of December, fared slightly better than the rest of the country as tougher restrictions were in place in the north of England under the tiering system. However, sales in the capital were still down 66.8% on a year ago, compared with a 73.9% decline outside the M25.
Paul Newman, the head of leisure and hospitality at the accountancy firm RSM, which produces the tracker alongside the data provider CGA and Coffer Group, a leisure industry specialist, urged the chancellor to step in quickly.
“Urgent clarity on substantial, additional government support is needed now as the 3 March budget may simply be too late. The chancellor’s latest grant package does not go far enough, barely touching the fixed monthly site costs that businesses face,” Newman said.
The interventions come after Sunak announced £4.6bn in new grants for firms in the hardest-hit sectors of the economy last week. The furlough scheme – which has been used to subsidise the wages of more than 9m jobs at more than 1m companies since its launch, at a cost of more than £46bn so far – has also been extended until the end of April.
However, business leaders said companies needed a further year of business rates relief and an extension of the 5% reduced VAT rate for hospitality firms owing to the cumulative hit from multiple lockdowns.
Adam Marshall, the director general of the BCC, said government support schemes had saved many firms and jobs, but they had not gone far enough to help many survive a tough start to 2021.
“The drip-feed approach to business support measures has meant many firms simply cannot plan for the future,” he said.
“We are urging the government to urgently adopt a package of measures that covers the whole of 2021, and that takes away the cliff-edges firms face in a few weeks’ time when reliefs, forbearance and furlough are set to end. Many companies simply can’t wait until the March budget. Action is needed now.”
A Treasury spokesperson said more than £280bn had been spent by government to support jobs and businesses during the pandemic, adding: “As the chancellor set out this week, the budget is the most appropriate interval to consider what further interventions may be necessary, given these schemes now extend through to the spring.”