There are calls for Sunak to introduce a range of short-term measures, such as offering relief on business rates and extending deadlines for VAT and PAYE payments to improve the cashflow position of travel firms struggling to cope with the effects of Covid-19 on their businesses.
Sunak is also expected to address the issue of Air Passenger Duty during his budget speech in the House of Commons with many calling for it to be suspended or reformed, particularly on domestic flights following the collapse of Flybe last week.
Extraordinary measures
Abta has written to prime minster Boris Johnson ahead of the budget to call for the government to “consider steps to protect healthy businesses that may suffer financial distress”.
These steps could include bridging loans, business rates relief, VAT and PAYE deadline extensions, and a six-month “holiday” from APD.
Abta chief executive Mark Tanzer added: “As the outbreak of coronavirus develops, travel businesses are under increasing pressure. They cannot wait to see what may happen in the months to come, we are asking the government to act now in taking steps to protect them.”
Similar requests are being made by UKinbound, which represents more than 400 UK tourism businesses. It wants a “pause” on business rates for at least three months, as well as being abolished in quarantined areas during any period of non-trading.
Joss Croft, UKinbound’s chief executive, said: “We are hoping that government will do the right thing in the budget and provide financial support for businesses that are currently struggling with cashflow and business payments in order to tide them over until this crisis has abated.”
Encouragingly, Sunak has previously pledged to help those businesses directly affected by the virus, including providing assistance for firms facing cashflow problems due to the crisis.
He has also admitted the impact on UK business “could be significant, but for a temporary period of time”.
Air Passenger Duty
Pilots union Balpa is calling for APD to be suspended for the next six months to help the aviation industry to get through the worst of the Covid-19 crisis, which has already helped to see the demise of Flybe, with other carriers slashing flights and asking staff to take unpaid leave due to collapsing demand.
General secretary, Brian Strutton said: “Air Passenger Duty is already a huge burden on the UK aviation industry costing the airlines £3.7 billion per year, and is by far the highest in Europe.
“Right now there is a strong case for the government to suspend APD for the next six months and make significant reductions in the longer-term to help this struggling industry.
“Demand is down so much over the summer that we could easily see more airlines collapse without government action, and that would have a significant knock-on effect to the economy.”
Most of the industry’s pleas to reduce APD have been largely ignored over the past decade. But given the extraordinary times the world and the travel industry are facing, now may finally be the time when the chancellor finally delivers the kind of change needed.
Stimulating demand
The Federation of Small Businesses (FSB) is calling for the chancellor to temporarily cut VAT if there is a “significant drop off” in consumer demand due to the virus.
FSB also wants Sunak to introduce “targeted access” to finance programmes for firms struggling with cashflow issues – similar to Japan’s decision to make interest-free loans available to small companies.
Another demand is for the government to establish a “hardship fund” for self-employed people who lose contracts or are unable to work because of the need to self-isolate.
As a longer-term measure, the organisation is calling for a “fundamental review” of business rates to take more small firms “out of the system altogether”.
FSB national chairman Mike Cherry said: “Today’s budget is the chancellor’s first big test, and an opportunity to show he is unequivocally on the side of the small business community at an uncertain time.
“Supporting small firms being impacted by the spread of coronavirus means both introducing new targeted measures and delivering on existing promises.
“The horse has already bolted in many countries, so it’s critical that the chancellor takes action now to mitigate any future escalation of the situation here in the UK.”
With the coronavirus crisis set to get worse before it gets better both in the UK and globally, Sunak is facing the kind of pressure to deliver some short-term financial respite to businesses that few of his predecessors in No 11 Downing Street have had to cope with – especially when preparing to make their maiden budget speech. Can he deliver?
