Furlough should be extended ‘before Budget’


Tony Danker became CBI director-general in November. Photo: Stefan Rousseau/PA Wire/PA Images

Rishi Sunak needs to act now, ahead of his Budget, to help protect UK companies through the Spring to ensure their survival until the economy reopens fully, according to the CBI.

In a letter to the chancellor, the business group has called upon the government to extend – in the coming weeks – the Coronavirus Job Retention Scheme to the end of June. It has also recommended actions for the Budget itself, which is scheduled for 3 March, to “build a bridge” to a sustained economic recovery by stimulating business investment, with comprehensive reform of the business rates system top of its list.

The CBI said the Treasury had listened and acted swiftly throughout the pandemic, but with the latest lockdown squeezing cash flow and customer demand like never before, resilience is at an all-time low.

Tony Danker, the new director-general of the CBI, said progress on the vaccine rollout brings real cause for optimism but, “almost a year of disrupted demand and extensive restrictions to company operations is taking its toll. Staff morale has taken a hit. And business resilience has hit a sobering new low.

“The government must once again stand shoulder-to-shoulder with businesses to underwrite support for the duration, helping viable enterprises to last the course.”

Ahead of the Budget, the CBI wants the government to:

  • Extend furlough beyond April to June, a call made by the HR body the CIPD last month
  • Commit to targeted support thereafter to give firms the certainty needed to protect jobs
  • Lengthen repayment periods for VAT deferrals until June 2021 at the earliest, and
  • Allow firms to defer VAT bills due now for a year.

It also wants Sunak to prolong 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.

“Many tough decisions for business owners on jobs, or even whether to carry on, will be made in the next few weeks,” explained Danker. “If the government plans to continue its support then I urge them to take action before the Budget which is still more than six weeks away.

“The government has done so much to support UK business through this crisis, we don’t want to let slip all the hard work from 2020 with hope on the horizon. The rule of thumb must be that business support remains in parallel to restrictions and that those measures do not come to a sudden stop, but tail off over time. Just as the lifting of restrictions will be gradual, so must changes to the government’s sterling support to businesses.”

Sunak and and Boris Johnson met with around 30 business leaders yesterday, the first meeting of the “Build Back Better Council” and Sunak is also setting up a committee to review regulation, now Britain has left the EU, to stimulate growth and attract new investment.

A year of disrupted demand and extensive restrictions to company operations is taking its toll. Staff morale has taken a hit. And business resilience has hit a sobering new low” – Tony Danker, CBI

Rain Newton-Smith, CBI chief economist, said: “There is clear light at the end of the tunnel and reasons to be optimistic as the UK gets ready to lead the world on tackling climate change through hosting the G7 and COP26 this year.

“The government should use the upcoming Budget to speed ahead to low carbon: to accelerate investment in low-carbon infrastructure – through fundamental business rates reform to promote energy efficiency – and the innovative technologies that will smooth the path to achieving net-zero by 2050.”

She described the next Budget as an opportunity for a balanced economic recovery, “not driven solely by consumption and government spending”, stimulating investment and tackling the systemic challenges.

“Top of that list must be a fundamental review of our outdated business rates system, to, drive essential investment in energy efficiency, support our struggling high-streets and level-up business investment across the UK.

“Business shares the government’s ambitions of levelling up and boosting productivity and innovation. Tackling the immediate jeopardy facing firms will help build a bridge to a lasting recovery.”

The CBI was also wants the Budget to incentivise business investment in retraining and upskilling, for the apprenticeship levy to evolve into a flexible “Skills and Training Levy” to unlock business investment in high-quality accredited training, and to transform Jobcentres into “Jobs and Skills Hubs” to help people to retrain.

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