A cut to stamp duty? A drop in VAT? A cash incentive to take on apprentices?
While we have seen glimpses of what today’s economic update from Rishi Sunak will hold — notably an ambitious support package for the arts sector and funding for traineeships — a great deal remains unknown.
One thing we do know for sure, though, is that this week’s intervention will mark a decisive moment for the country as we seek to emerge from one of the sharpest recessions on record.
Thankfully, support measures were swiftly ushered in when the lockdown took hold. Grants, loan guarantees and business rates breaks have put many small firms in a position to bounce back.
But we’re far from being out of the woods.
While the majority of people have been helped, some have not. These include company directors and the newly self-employed — left without support for more than 100 days during an immensely challenging period.
Now, as we move towards emergency measures being wound down, small business owners need to know what’s coming next by way of long-term measures to aid recovery. The chancellor must ensure these measures leave no one behind.
One certainty we can unfortunately point to is a massive hit to the jobs market. The number of people seeking out of work support more than doubled between March and May, to 2.8 million.
Fortunately, small firms can still furlough staff on a flexible basis for a few months to come. But such has been the economic impact of lockdown that many are already having to make tough decisions — cutting back hours, or even making redundancies.
So the chancellor must take a jobs-first approach today.
Following the financial crash, nine in 10 people who left unemployment to join the workforce did so through either a small business or self-employment, so it’s clear where support should be targeted.
Concerningly, as things stand, labour costs are more frequently cited as a barrier to growth among small firms than any other. In these incredibly challenging times, bringing them down will be central to ensuring businesses keep hiring.
The options for doing so are myriad. A cut to employers’ national insurance contributions would mark one way forward, as would uprating the more targeted employment allowance, which entitles smaller firms to £4,000 off their NICs bills.
To complement that fall in labour costs, we’ll need to see a simultaneous rise in labour market opportunities.
Young people often bear the brunt of recessions. The Prime Minister’s promise of an “opportunity guarantee” is welcome, following (as we have suggested would be sensible) a model akin to the Future Jobs Fund.
But for it to be a success, policymakers will need to stand ready to collaborate on how we ensure the guarantee works in a small business context. SMEs will need assistance with both training and wage costs.
On the demand side, you can’t go wrong with a VAT cut, instantly shoring-up shopper appetite when many are still cautious about leaving the house.
Such a move would be particularly important to the small firms that will be last to reopen, and which have suffered the most severe hit to customer demand.
Finally, the Treasury needs to consider how this crisis will permanently alter the way we do business.
The adoption of ecommerce channels, home-working and card terminals has ramped-up during lockdown — a trend which shows no sign of abating. So let’s start with the basics: a fast, reliable broadband connection for every one of the UK’s 5.8 million small businesses — no exceptions.
Small firms are resilient — we have bounced back before. And while we’re still very much in the woods, today is the chancellor’s chance to map a path to recovery.
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