What do business leaders want to see in this year’s Spring Budget?

Business Leader Voices: the Spring Budget edition

Ahead of the Spring Budget, Business Leader got a range of views from a wide range of industry experts on what companies and entrepreneurs really need in the upcoming announcement.

SMEs urge Sunak to scrap COVID-19 loan repayments

Hundreds of businesses have written to the Chancellor, urging him to scrap repayments on Government-backed loans ahead of the Spring Budget, or risk a tidal wave of insolvencies and business failures.

In an open letter to Rishi Sunak, 388 business leaders have called for “swift and decisive action” that would see debt accrued through Government-backed loans entirely written off for Small and Medium-Sized Enterprises (SMEs) to give the 2 million plus businesses who have taken out loans since the beginning of the pandemic, the best chance of survival.

Earlier this month, the Chancellor unveiled the “pay-as-you-grow” initiative for the Government’s Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS). This offers businesses the option to extend repayment terms from six-years to ten, as well as make interest-only payments or pause them entirely for six months.

However, the co-signatories to the “Fighting Back for Business” letter to Rishi Sunak argue that these measures do nothing more than “delay the inevitable” with millions of SMEs teetering on the brink of insolvency. This is reinforced by recent warnings from the Federation of Small Businesses (FSB) that 250,000 businesses could be lost within the next 12 months alone.

SMEs have long been described as the engine room of the UK economy, with most recent statistics suggesting that they account for 52% of private sector turnover. The hundreds of businesses who put their name to the letter span various sectors of the UK economy including corner shops, launderettes, hairdressers, theatre and dance companies, travel agents, yoga studios and countless others.

Many of the businesses have experienced extraordinary and considerable losses throughout the pandemic, with some being unable to trade since March 2020. Of the 388 businesses who co-signed the letter to the Chancellor, some have been forced to sell business critical equipment and others forced to take out personal loans in order to pay workers who had fallen through the cracks in Government support. The campaign group believes that writing off loan repayments would give the millions of businesses who took out Government loans earlier in the pandemic a lifeline to continue trading into the future.

It is estimated that the cost of writing off loan repayments would cost the Treasury approximately £68bn. However, the businesses argue that when compared to the costs of bailing out the banks after the financial crisis, which amounted to around £137bn, writing off repayments on Government-backed loans would be not just realistic but crucial to the recovery of the UK economy.

Simon Dolan, a serial entrepreneur and signatory to the “Fighting Back For Business” campaign letter said: “SMEs are the lifeblood of the UK economy and have been consistently overlooked during the covid-19 pandemic. Millions of businesses have admirably navigated the turbulent waters they have found themselves in during the last 12 months and deserve to be supported in their road to recovery.

“Not a single business would have wanted to take out these loans, and many did so under the assumption that they would be trading once again within a couple of months, not still waiting for clarity and certainty a year later. The Chancellor’s “Pay as You Grow” initiative represents nothing but lip-service, with SMEs still being left with cumbersome loan repayments, stifling their growth and recovery within a few months.

“It is time that the Chancellor listens to the voices of actual businesses across the UK. The first step towards a thriving economy post-coronavirus hinges on businesses still being open, and ensuring they are not weighed down by looming loan repayments will be vital in countering the possibility of unparalleled insolvency figures.”

James Thompson, Founder and Director of tour company Marmot Tours said: “We have been unable to run any holidays for 18 months, so have not had any income during this period. We are surviving on a loan, which is going to take years to repay. There has been no tailored support from the UK government for the travel industry. We are currently uncertain when travel will resume and in desperate need of a grant so that we can recover.”

What do post-Covid workers really need?

Andrew Mawson, founder of Advanced Workplace Associates (AWA) spoke to Business Leader about the importance of getting people back to the workplace in the correct manner, and what your employees really need post-COVID-19.

Rishi Sunak has a dilemma. Presenting probably the most important Budget in recent memory, the Chancellor is under massive pressure to provide ways of stimulating an economy ravaged by the Covid-19 pandemic.

What the lockdown has taught us is that a large proportion of workers do not have to shlep into an office every day to do their work effectively. People can be just as efficient, if not more so, working wholly or partly from home. This has a massive potential benefit not only in wellbeing and work/life balance, but also for the environment, reducing unnecessary commuting journeys and the need for big offices, that need heating in the winter and cooling in the summer.

Instead of the rumoured “back to work” incentive to re-open offices, how about a grant for people to have better tech at home? And instead of ploughing multiple billions into rail and roads (I’d say cancel HS2 but it’s probably too late), spend it on ensuring everyone has decent broadband, stealing a policy that the Labour Party was derided for suggesting? Also, to ensure our children are equipped for the knowledge economy, what about a laptop for every child starting secondary school?

Secondly, Boris Johnson has highlighted the problem of our cities being hollowed out by Covid-19. To deal with the impact of people not going into the centre of towns for work, and the problems of high streets with empty shops, support the conversion of empty offices and shops into either homes, or into local work hubs that businesses can use if people need to work together, rather than having to commute into a central office. This could bring back the buzz of city centres and high streets, so helping the hard hit hospitality industry.

The Government has set a timetable for a return to the old England, but it has an important leadership role in transforming the country. By emphasising the commitment to net zero targets and net models of working, and by saying to business chiefs: “Come along with us on this journey to the future we want to build”, Rishi Sunak has the opportunity to be the leader we need. It’s time to grasp the nettle to build back better.

Better future for holiday letting firms?

The Chancellor Rishi Sunak should use the Budget this week to relax the conditions for rental properties to qualify as furnished holiday lettings (FHLs), say tax and advisory firm, Blick Rothenberg. Fiona Fernie a partner at the firm spoke to Business Leader about the future for the sector.

FHLs are increasingly popular as a result of sites such as Airbnb and Booling.com and, with foreign travel continuing to be banned as a result of coronavirus restrictions, are likely to be more in demand this summer than ever before.

The problem is that due to strict tests imposed by HMRC property owners are likely to lose their tax statuswhich would effectively give them a higher tax burden through no fault of their own.

In view of the crippling impact of the pandemic on the hospitality industry, it seems only reasonable that the Chancellor, and HMRC, should create a concession for 2020/21 and 2021/22 so that this does not happen.

The problem is this, the Government have encouraged FHL ownership, by providing tax benefits compared to properties let out normally or on an Assured Shorthold Tenancy – including the generous treatment of mortgage interest as an allowable deduction in full, the potential for a lower capital gains tax rate on sale and the income taken into account when making pension contributions.

However, there are very strict tests as to what can be considered to be an FHL, including what are known as the 3 occupancy conditions, all of which have to be met. These are: that the property must be available for letting to 3rd parties as an FHL for at least 210 days in the year, must actually be let commercially to the public for at least 105 days in the year, and lettings which exceed 31 continuous days must not exceed 155 days during the year. The pandemic is likely to have caused many landlords operating FHLs to fall foul of these conditions.

The three national lockdowns imposed by the UK government means that it is more than likely that many properties have not been let for as much as 105 days and thus fail the letting condition.

In normal circumstances, if the owner doesn’t let the property for at least 105 days, they have two options to make elections that can help them reach the occupancy threshold; the averaging election (averaging occupancy levels across all their properties) and the period of grace election. (an election to allow the property to continue to qualify as an FHL as long as the pattern of occupation and availability conditions were met).

The averaging election is unlikely to be of any help at all in the current circumstances since all such properties are likely to have been hit by reduced occupancy in 2020/21. A period of grace election may help but can only be made under certain conditions which could prove difficult for some owners whose businesses are in their infancy.

There are also serious question marks over the other two conditions. For example, during periods where Government advice has been that people either cannot or should not take holidays in particular locations, can landlords say that their property was even available for letting, let alone occupied?

House buying frenzy

The Bank of England recently announced that mortgage approvals have far exceeded expectations again this year – but will a further extension of the free stamp duty ruling be key to a prosperous 2021. Business Leader spoke to Group CEO of Enness Global Mortgages, Islay Robinson on what to expect.

These latest mortgage approval numbers highlight a market at its most buoyant in the month of January since before the financial crisis of thirteen years ago. Activity is far higher than normal levels and this has no doubt been driven by the current stamp duty holiday.

Homebuyers are shrugging off any fears of a pandemic property decline in their rush to secure a stamp duty free purchase. This frenzy looks likely to continue until summer, given Rishi Sunak’s potential pending announcement of an extension via Wednesday’s budget.

The question for sellers, estate agents and mortgage brokers is, ‘what happens once the levy is reinstated?’

We may be about to take a step back from the cliff-edge should the stamp duty holiday be extended. However, this is only prolonging the inevitable and, if anything, will only steepen the gradient of any potential market decline.

We should perhaps make the best of these ‘sunny days’ whilst we can before another stamp duty deadline countdown leaves us teetering on the edge once again.

The current stamp duty holiday has helped to turbocharge homebuyer demand since it was introduced in July of last year, suspending the tax paid on the first £500,000 of all property sales in England and Northern Ireland.

Business Leader then heard from Managing Director of Ascend Properties, Ged McPartlin, on the topic.

Wednesday’s Budget is expected to include a deadline extension in one form or another, and Ascend Properties has revealed that homebuyers not only want these rumours to become a reality, but the majority would like to see stamp duty scrapped altogether.

79% want an extension

Ascend’s research shows that 79% of buyers would like to see an extension. 51% want an extension for the whole market, while 28% think it should be restricted to delayed sales having offers accepted before the original March deadline.

71% want more

With stamp duty providing an additional financial hurdle when looking to buy, it comes as no surprise that 71% would like to see this archaic land tax scrapped altogether.

Stamp duty holiday isn’t driving intent to purchase

However, while homebuyers would mostly like to see an extension, the stamp duty holiday hasn’t been the driving influence when it comes to their decision to buy.

Ascend asked if the original introduction of the stamp duty holiday had caused homebuyers to enter the market in search of a property.

52% stated it wasn’t the reason, with a further 36% saying they were already in the process of moving when it was introduced. However, for 12%, it did act as the catalyst for their current property purchase.

Despite the long market delays caused by stamp duty fuelled buyer demand enveloping the market, 61% of buyers have managed to complete and save on stamp duty.

What would a holiday mean for current homebuyers?

For those still in the thick of it and yet to complete, 34% were unphased by an extension, stating they wanted to move anyway, but a saving would be nice if the deadline were extended. 25% also said that delays on their purchase would cause them to miss the original deadline, so an extension would see them save.

However, for the other 40%, a potential extension could have a far more significant impact on their purchase.

20% stated their sale is likely to fall through if there isn’t an extension, with an additional 20% stating they would call off their current sale to look for a different property if more time is granted on the current stamp duty deadline.

“The stamp duty holiday has been a success for buyers able to complete in time to secure a saving. However, it’s also caused an enormous backlog of sales due to the industry becoming overwhelmed by the sheer volume of buyers entering the market.

“We can unequivocally say that a deadline extension will benefit more homebuyers should it materialise on Wednesday. At the same time, it’s also likely to exacerbate the current issues of extended purchasing times.

“While many would like to see it happen, a stamp duty saving isn’t the primary driving force behind the intent to purchase, so you have to question whether an extension is worth the many additional months of transactional delays that it is likely to cause.

“Our advice to homebuyers at present would be to act as they would if no holiday was in place at all. You’re going to face delays, and you might not complete even if an extension is implemented. Stay calm, take one day at a time and don’t stress yourself out hoping to save on stamp duty. That way, any saving will come as a bonus, and a failure to secure one won’t bring such disappointment.”