Chancellor Rishi Sunak must use today’s Spring Statement to protect UK Plc from the intensifying global economic crisis – including bringing in a temporary energy price cap for small businesses, say East Midlands business leaders.
As industry and households brace themselves for spiralling energy and raw material costs, worsened by the consequences of Russia’s invasion of Ukraine, the region’s business leaders say Government intervention could be critical.
It comes as a new Which? survey suggests overall consumer confidence levels were their lowest since October 2020.
Its consumer rights expert, Adam French, said: “Our research shows how a relentless cost of living crisis is putting huge pressure on household finances, with confidence in the economy at its lowest level since 2020.
“This is particularly worrying as price hikes and inflation are only predicted to rise further in 2022 – even after the April increases take effect.”
Scott Knowles, chief executive of East Midlands Chamber, said the impacts of energy price rises and higher National Insurance contributions could be too much for many businesses, and the Spring Statement represented a perfect opportunity for the Chancellor to protect the UK from further economic hardship.
He said: “Companies are coming under significant cost pressures from just about every area of running a business, including energy, raw materials and people.
“This is squeezing margins, bringing cashflow into negative territory for the first time in more than a year and impacting investment intentions, which are vital to making the productivity gains that will ultimately drive growth and create jobs locally.
“While the lifting of all Covid-19 restrictions last month at last gave firms some certainty, the cost of doing business crisis – exacerbated by interest rates rising again last week – threatens to thwart the economic recovery.
“With all this in mind, it’s imperative the Chancellor fortifies our economy for what will likely be some gruelling weeks and months ahead by resisting any urges to add further damaging costs to businesses.
“Implementing the British Chambers of Commerce’s five-point plan – which includes delaying the planned national insurance rise and introducing a temporary energy price cap for small businesses – would go some way to shielding firms from the worst of this crisis, giving them headroom to keep a lid on prices, protect jobs and make investment that is so vital to sustaining our economic prospects.”
Chris Barlow, COO of the Birmingham and Leicester offices of chartered accountants MHA MacIntyre Hudson, said protecting the manufacturing sector – which has a UK annual output of more than £190 billion and provides more than 2.5 million jobs – would be crucial to “post-Covid recovery and in a world of post-Brexit opportunity”.
He said suspending the impending NIC increase would mean more could be invested in plant, machinery and buildings to safeguard and create jobs.
Meanwhile Lloyds Bank said two-in-every-five East Midlands businesses wanted help managing rising prices and energy costs, with one-in-10 considering scaling back operations.
The bank said company directors were also looking for VAT reductions and grants to cover energy costs.
Dave Atkinson, regional director for the East Midlands at Lloyds Bank, said: “Rising prices are causing multiple challenges for businesses in the East Midlands and the pressure from inflation shows no sign of abating in the near-term.
“Firms will need support to cope with these additional pressures, and we will remain by their side to help them navigate this difficult period and continue to drive the region’s economic recovery.”
Mike Tuhme, head of tax at KPMG in the Midlands, said it was likely the Chancellor would be compelled to make tax announcements due to the intensifying cost of living crisis “coupled with what many expect to be a fairly rosy fiscal forecast”.
He said: “Businesses hoping for more government support may well have to wait until the autumn at the earliest.
“The fog of geopolitical challenges and acute financial pressures on individuals means that any complex decisions to support UK plc will be delayed.
“But the UK has an urgent need to address its corporate tax system to make it more competitive in the global market.
“If we want to drive inward investment, support employment and help businesses sell abroad, those decisions can’t be put off forever.”
