Wednesday’s Budget is going to be one of the most closely watched in history as various parts of the UK economy demand draconian support to survive the pandemic.
The Chancellor is expected to announce measures that should be welcomed across the board, including a £15bn support package to extend the furlough scheme and Self-Employment Income Support scheme.
What industries want
A group of 83 MPs have asked Rishi Sunak VAT cuts and business rates holidays for hospitality players to be extended until next spring, as well as providing improved loan repayment terms and HMRC tax deferrals to give businesses more breathing room to recover.
Similarly, the British Retail Consortium said its members need ‘Rates, Rents and Grants’: an extension of business rates holiday and the moratorium on debt enforcement, alongside a boost in financial support.
Next’s (LON:NXT) Lord Simon Wolfson said last month high street retail should have business rates slashed by 35% to ensure its survival.
Meanwhile, trade body UK Music called for a Government-backed insurance scheme so event organisers can count on a safety net even in case of cancellations.
At the moment, booking venues in June or July is perceived as too risky in case lockdown exit dates are postponed.
As the travel sector opens up, workers’ union Transport Salaried Staffs’ Association (TSSA) said local transport has been “all but ignored” by the government and it needs “crystal clear” support measures.
“We have already seen far too many jobs and businesses lost, and despite our calls, no sector specific support. We can expect a surge in holiday bookings as we climb out of this crisis, but Ministers must not leave things to chance,” said general secretary Manuel Cortes.
Manufacturers are also hoping to receive support for those companies that have been hit by Brexit as well, such as those in the automotive segment.
What they don’t want
Online retailers are spooked by the so-called ‘Amazon tax’ for companies that have been doing exceptionally well during the pandemic.
ASOS (LON:ASC) boohoo (LON:BOO), Gymshark, The Hut Group (LON:THG), Ocado Group (LON:OCDO) and AO World (LON:AO.) are understood to have established a trade body to lobby the government on tax reforms.
Meanwhile, PureGym welcomed the £18,000 Restart Grant but said that gyms need much more help after trading was hammered by the recent closures.
“When we are closed we have zero revenue and despite huge efforts to defray costs and some government support we are still losing £500,000 per day. This is clearly unsustainable and presents a massive existential threat for the industry,” managing director Rebecca Passmore told The Guardian.
What they are likely to get
The Treasury is to unveil a £5bn pot for grants to high street shops, pubs, restaurants and personal service firms such as hairdressers and gyms, with 700,000 firms given the opportunity to claim up to £18,000.
The retail, hospitality and leisure sectors are set to enjoy business rates holiday a bit longer, alongside the extension of a temporary VAT cut from 20% to 5% for hospitality and tourism.
Reports from last month suggested a new ‘Eat out to Help Out’ initiative may be implemented to encourage consumers to spend.
Theatres, museums and live music venues are estimated to get an extra £400mln in support, while spectator sports in England will receive a £300mln boost.
Housebuilders will benefit from the extended stamp duty holiday on residential transactions under £500,000 until the end of June and the resumption of a more generous ‘Help to Buy’ scheme to support first-time buyers.
The government would provide state guarantees to allow people to dish out only a 5% deposit on homes worth up to £600,000.
Corporation tax is earmarked to be raised from 19p in the pound to 25p over the course of the parliament.
An increase to 22p alone would add £10bn to the government’s pockets, while Berenberg said a 1-2% hike would not have any major negative economic consequences.
Online retail may also face higher taxes such as a new green tax on online delivery items, according to the Telegraph.
Sunak has already introduced a 2% digital services levy, but with profits of online groups going through the roof due to people being locked indoors for the best part of a year the temptation to tinker again might be irresistible.
That kind of tax rise is also one of the few likely to earn voter brownie points, same as the so-called Freeports, which will be special economic zones with lower taxes to boost the local economy.
Fuel duty is not expected to be hiked although there are plans to improve the country’s green credentials.
Sunak is also anticipated to allocate £22bn to a national infrastructure bank, which will fund £40bn worth of projects with the help of private sector investors.
The UK will also establish the world’s first sovereign green savings bond for the public to invest in green energy and clean transport projects, with £20mln for offshore wind, £70mln in low-carbon energy storage and £4mln to produce green-energy crops.