Spring Statement 2022: Key asks to help businesses
Greater Birmingham Chambers of Commerce
On Wednesday, Chancellor Rishi Sunak will deliver his Spring Statement to the House of Commons. With Britain grappling a cost-of-living crisis, a pandemic, the highest levels of inflation seen in 30 years, and now a war in Europe, this is a critical opportunity for the Chancellor to extend a much-needed lifeline to businesses and individuals across the country.
Millions are facing a real terms decrease in wages, and soaring heating and food bills, and firms are voicing their concerns about the increasing cost of doing business. The Greater Birmingham Chambers of Commerce is therefore calling on the Government to:
- Introduce an energy price cap for businesses
The United Kingdom is in the midst of a gruelling energy crisis, with energy prices increasing by 25% in the 12 months preceding October 2021. Ofgem recently announced a 54% increase in the default tariff cap for households to £1,971; however, unlike households, there is no price cap to protect businesses from soaring costs.
The Chancellor must urgently introduce an energy price cap for businesses to help firms weather the current storm. Most importantly, this will provide smaller firms with the necessary support in the face of eyewatering energy price increases which threaten not only their post-pandemic recovery but also their future growth.
- Provide SMEs with energy grants
Grants, benefits and other support programmes are currently offered to individuals by the Government and various energy suppliers. Such measures must be extended to Small and Medium-sized Enterprises (SMEs), who would greatly benefit from additional grant support in the coming months to help them cope with spiralling energy costs.
- Introduce additional support for energy efficiency
With 80% of firms expecting their energy prices to increase, the Chancellor should consider providing more support for improving the energy efficiency market and business activity to reduce costs. This is imperative for energy intensive sectors such as accommodation and manufacturing, both of whom have suffered due to the pandemic and associated supply chain issues. Incentivising the adoption of energy efficient products and processes will alleviate cost pressures whilst preventing energy wastage.
- Delay planned National Insurance rises for a year
In September 2021, the Government announced a new Health and Social Care Levy to fund increases in spending on the National Health Service and to support reforms to the provision and funding of social care. In 2022/23, the first stage of the Levy will be introduced, with workers facing a temporary 1.25 percentage point increase to both the main and additional rates of National Insurance contributions.
According to the Government’s own predictions, over 1.6 million employers will be ‘significantly impacted’ by the change. 665,000 businesses will face an average increase of £450 per year, whilst 320,000 businesses will experience an even larger increase.
The Levy will undoubtedly increase cost pressures on businesses, with 50% of businesses in Greater Birmingham expecting their prices to increase in the next three months according to GBCC’s latest Quarterly Business Report. Growing cost pressures – including an increase in National Insurance contributions – will inevitably worry those hoping to use this time to recover and grow, with much-needed cash being taken away from investment in staff and technology.
- Continue reform of the business rates system
In line with the British Chambers of Commerce’s call for a moratorium on all policy measures that increase business costs, the Government must pursue meaningful reform of the business rates system. Whilst some encouraging steps were taken at the Autumn Budget, such as more frequent revaluations and incentives for green technology, meaningful action is still needed on the level of the multiplier, for example.
Though the Government has just closed their business rates consultation, any changes need to be implemented swiftly in order to alleviate some of the costs facing businesses. Firms cannot afford to wait a year for progress to be made, as seen with the rollout of the £1.5 billion Covid Additional Relief Fund.
- Extend the VAT reduction for hospitality businesses
From 1st April, without the Chancellor’s intervention, the VAT rate for most goods and services within the hospitality industry will increase from 12.5% to 20%. The reductions were originally introduced in July 2020 to help businesses, protect over two million jobs following the lifting of the first lockdown, and support the reopening of the economy.
Hospitality businesses are only just beginning to show positive signs of sustained recovery after a difficult two years, suffering recently as a result of Plan B restrictions and the associated impact on consumer confidence.
Given that businesses are already being crippled my massive overheads and the disposable income of consumers is rapidly decreasing due to the ongoing cost of living crisis, the Government must extend the VAT reduction to support businesses during what is still an incredibly challenging time.
How can the Chamber help?
The Greater Birmingham Chambers of Commerce will share a summary of the Chancellor’s announcements following his delivery of the Spring Statement, and will also produce a full breakdown of what the Spring Statement will mean for businesses in the Greater Birmingham area.
The Chambers will continue to gather reactions and views from our members, feeding these into our ongoing lobbying activity.