Failure to act fast on Covid support will stunt UK economic recovery - CBI Director-General

Speaking at a Resolution Foundation webinar for the launch of their new report, On firm ground?, CBI Director-General Tony Danker will emphasise the need for a soft landing for UK businesses to avoid a ‘cash crunch’ in April 2021. He will argue that without this, the post-pandemic economic recovery will be compromised.

Tony will outline the cash pressures now facing firms as they respond to the path of the pandemic. Many companies – especially those in the hardest hit sectors – are dealing with low demand, rising costs and the risk of cash reserves being wiped out when they fully restart. This threatens their survival and the jobs they support.

Tony will identify three enablers critical to the UK’s post-pandemic recovery:

1. Protecting businesses’ current cash positions to support investment and protect jobs when the UK economy starts to reopen.
2. Providing stability, certainty and incentives to encourage business investment.
3. Ensuring access to finance can continue to boost business growth.

He will highlight three critical areas where the Chancellor can take swift action:

1. Extending the Job Retention Scheme (JRS) beyond April to the end of June and committing to tapered support thereafter to give firms the certainty they need to protect jobs.
2. Lengthening repayment periods for existing VAT deferrals until June 2021 at the earliest and allow firms to defer Q1 2021 VAT bills due now for twelve months.
3. Extending the business rates holiday for at least another three months to those UK firms forced to close under current restrictions and expanding relief to their supply chains.

Tony Danker, CBI Director-General, said:

“How businesses exit this crisis will determine the strength and timing of the recovery. This Resolution Foundation report provides telling data on firms’ precarious cash position. Some sectors have precious little funds to survive much longer, while others are likely to see funds drained if support is removed before demand fully returns.

“First and foremost, we need extended business support to recognise the true health and economic picture. Then this support should be tapered down as the economy reopens. We then need a blend of long-term policy clarity and the right incentives to ensure businesses invest.

“Without this vital policy bridge, we will fail to create a platform for a better decade enabled by strong economic growth. That is the best way to help the UK emerge from this crisis, compete successfully in the world, and achieve sustainable public finances.”