Business leaders respond to government Spending Review

The government yesterday (Wednesday) pledged support for jobs and training as chancellor of the exchequer Rishi Sunak’s Spending Review laid bare the full economic impact of the coronavirus pandemic.

The UK economy, he confirmed, has suffered its biggest hit for three centuries – 11.3 percent – and the UK is set to be the hardest hit of all the G7 nations.

Economic output is not expected to return to pre-Covid levels until the fourth quarter of 2022. And by 2025 the economy will still be three percent smaller than anticipated back in March.

Meanwhile, unemployment stands at 1.62 million – up 300,000 since lat year – but this is expected to surge to 2.6 million (or 7.5 percent) by the middle of 2021. That said, the UK’s unemployment rate is still lower than that of Italy, France, Spain, Canada and the United States.

The chancellor said employment was the government’s number one priority, pledging £400 million next year to start a £3 billion Restart scheme to help one million unemployed people back into work.

“Our health emergency is not yet over, and the economic emergency has only just begun, so our immediate priority is to protect people’s lives and livelihoods,” the chancellor said.

Responding the the Spending Review, the British Chambers of Commerce welcomed government action on unemployment.

Director general Adam Marshall said: “Measures to help people return to work at this challenging time will help limit long-term unemployment but government must waste no time in putting these plans into action.

“Government and business will need to work together to re-train and re-skill the UK workforce.

“Investment in the Kickstart Scheme, in which Chambers are playing a leading role, and the launch of the Restart scheme, will be critical in helping to achieve that.

“With an uncertain winter ahead, the government will need to maintain an open mind on providing further support to businesses struggling to survive.

“As we look to rebuild and renew local and national economies, businesses will also need further significant incentives for investment in people, productivity and the planet.”

Rain Newton-Smith, chief economist at the Confederation of British Industry, said: “Stark forecasts point to tough times ahead. But through his statement, the Chancellor has made some bold autumn decisions to power a Spring recovery.

“The Spending Review lays the foundations for a brighter economic future. A new National Infrastructure Bank, a multi-year settlement on R&D, and a comprehensive plan for creating jobs and renewing skills are just some of the building blocks needed to deliver on this vision. It’s right to take this opportunity to plan for tomorrow.

“But ambition must be matched by action on the ground. The government’s commitment to build, build, build must be delivered now. This means a clear strategy to upgrade the UK’s infrastructure and publishing the Energy White Paper.

“And there can be no let-up in the support for firms facing new Covid restrictions. Firms need help to survive, then thrive. Business investment and confidence can be the engine of UK growth, creating jobs around the UK.”

The Federation of Small Businesses said the Spending Review was a “missed opportunity” and a pro-business Budget was need.

“A government which claims to be pro-enterprise had very little to say today about the importance of business and private sector job creation,” said National chairman Mike Cherry.

“Today brings the need for a pro-business Spring Budget into focus. Rather than being a tax-raising Budget, it must have growth and recovery at its heart.

“Depending on the spread of Covid and restrictions over the coming months, very significant interventions may well be needed far sooner than the Spring. We will at least need to see meaningful action to spur business and job creation by the time the furlough scheme is reviewed in January.

“The economic forecasts outlined today are stark. Our hopes of recovery will hinge on the success of small businesses. We need to see far more from this Government where reducing tax on enterprise, facilitating start-ups and bringing down operating and employment costs are concerned.”

Mr Cherry said the chancellor had missed an opportunity to help small business owners – “not least those who have been excluded from support measures.”

He said: “We have put forward proposals for a workable Directors Income Support Scheme and we need to see them taken forward.”

Campaign group Forgotten Ltd, which represents the owner directors of small and family-run limited companies who were excluded from government grant schemes, had more to say on this.

Regional spokesperson Fiona Scott said: “After eight months of little to no financial support for the business owners or the companies they run, protecting the jobs of their 7.5 million employees is becoming more and more difficult.

“Furloughing only works if there are companies for those staff to return to in the Spring. With many directors unable to qualify for grants, and furlough leaving them unable to work, the ‘back bone of the British economy’ have been left with only debt and potential insolvency.

“Many of these business owners have taken loans and these are now exhausted and Mr Sunak still refuses to hear the voices of those he has ignored and marginalised.

“The mental health impact of this situation has not been fully considered, nor the significant drop in tax revenue, diminished contribution to public services or the enormous burden this will place upon the welfare system and NHS.

“In the last few days we’ve submitted The Directors Income Support Scheme to the Treasury outlining how we can be supported and we would urge them to consider the policy proposal and engage with us urgently to prevent the needless loss of millions more jobs.”

Claire Ralph, policy manager at Business West, added: “As a region, Business West is disappointed with the government’s lack of capital investment announced yesterday.

“Some minor funding has been allocated to the West of England Combined Authority for local transport improvements through the Transforming Cities Fund. Elsewhere it was thin pickings – with our regional leaders having to bid against other English regions for a share of the new £4 billion Levelling Up Fund for local infrastructure projects to support our area’s economic recovery.

“We hope this doesn’t all ‘head North’.

“Extensions to grant support for businesses whose premises remain closed under high level tiers was absent despite the end of the national lockdown next week.

“Whilst most public sector workers outside the NHS have their pay frozen, the 2.2 percent increase to the National Living Wage and similar increases for younger workers and apprentices from April 2021 will further strain business margins in the private sector.

“Given Brexit is just six weeks away it was surprising the Chancellor made no mention of this – despite the subdued growth figures assuming an EU trade deal.

“The Government’s plan for paying for the crisis will emerge in the Spring, but at the moment he is keeping businesses very much in the dark.”