The British government is racing to piece together an economic rescue package after dire warnings from the leisure, transport and retails sectors that the coronavirus pandemic would lead to widespread business failures.
In the last few days ministers have been assailed by demands for billions of pounds of assistance from airlines, train companies, retailers, pubs and restaurants. They warned that the £7bn set aside to help businesses deal with the virus in the Budget was not enough as a near shutdown of society threatened hundreds of thousands of jobs.
Carolyn Fairbairn, head of the CBI business group, called for co-ordinated, fast, interventions: “We do not want to look back and say we acted too late,” she said.
Chancellor Rishi Sunak has been given the role of chairing a new “business economic response committee” which will oversee further efforts to help struggling companies.
Boris Johnson said on Monday the government would do “everything we can to give them [companies] the liquidity they need” as he announced stringent new measures to try to slow the spread of the virus. He called on everyone in the UK to halt non-essential travel and contact, urging people to avoid pubs, bars and restaurants.
The prime minister said support for business could include giving them more time to pay tax. Ministers will also look at other measures, including further relief on business rates, although they remain cautious about the idea of offering state loans to struggling companies.
Business groups emphasised the existential threat of the impact of the virus in emergency meetings and calls with a range of ministers and officials from government and the Bank of England on Monday, warning that some businesses were only days away from disaster.
Asked whether the government would respond to rescue pleas from ailing industries, one senior official said the new action plan would look “at ways to help both small business and large companies”.
The £7bn of new measures announced by Mr Sunak in last week’s Budget to help combat the economic impact of the epidemic, included business rates relief and a new hardship fund. But the chancellor said at the time that he would “not hesitate to act” if further action was needed.
Hospitality UK — which represents restaurants, hotels and bars — said the industry was four to six weeks away from running out of cash and warned the government was facing “hundreds of thousands of redundancies” without urgent action.
“Trade has dropped off a cliff. There is a need for urgency, it’s gone from manageable to catastrophic in 10 days,” said Kate Nicholls, chief executive of the lobby group. She added that turnover across the sector had fallen by 70 per cent because of the crisis.
The British Retail Consortium (BRC) sent a letter to the chancellor on Monday warning that many retail executives now had serious concerns about liquidity. In the letter, which has been seen by the FT, BRC chief executive Helen Dickinson said government needed to “urgently consider a financial package to support these businesses”.
Meanwhile, Willie Walsh, chief executive of British Airways’ parent IAG, on Monday warned of widespread failures of airlines across Europe. Peter Norris, the chairman of Virgin Group, which controls Virgin Atlantic, has urged the government to provide up to £7.5bn of emergency state support to rescue the UK aviation industry.
The Rail Delivery Group, which represents train operators, has also written to ministers urging support for hard-pressed train operators who have seen train journeys fall by a fifth in just weeks.
One senior rail executive told the FT that the rail companies were seeking relief of over £2bn on an annualised basis, depending on the length of the pandemic, based on the current 20 per cent fall in passengers and £10bn a year of fare revenue.
One way of channelling support would be to give companies “holidays” on the payments they make to government under the rail franchising system, the executive said.
The private operators have warned that without immediate support, the government would have to nationalise their operations leading, as one executive put it, to the accidental “Corbyn-isation of the rail sector by Johnson”, in reference to the Labour leader’s policy.
Meanwhile, Transport for London, which is already seeking a £650m loan from central government because of delays to the Crossrail project, said on Monday it could need a further £500m with passenger numbers already down by a fifth on the Tube.
The BRC said in its letter to the government that the Budget had not provided enough support for companies in the current crisis. “Prompt action could be the difference between survival and administration for some businesses, and with it, the jobs and shops that are essential to our communities around the UK,” the retailers’ group warned.
It called for the cancellation of business rates payments for three months, a delay in value added tax, excise duty or National Insurance payments, bringing forward the import VAT deferment change announced in the budget to April and the creation of a business continuity insurance fund.