LCCI's Budget analysis

Wednesday 3 March 2021

Here is London Chamber of Commerce and Industry's anaylsis of, and response to, today's Budget.

Richard Burge, Chief Executive, said: “In London, full economic recovery will not just happen when shutters can be lifted.  Lockdown easing will be staggered and the conditions after full unlocking have to be right for the safe return of domestic and international visitors, as well as business travel and trade.  That’s why today’s extension of support beyond the lockdown lifting dates makes sense and will be welcomed by business. 

"But the road to recovery may well end up with more speed restrictions than hoped, so it’s important the government remain open-minded to a need for further extension, if so.

“Announcements in the Budget about the Thames freeport and positioning the City of London as the leading market for high quality voluntary carbon offsets are welcome.  It’s vital that government continue to invest in London, as in real terms COVID-19 has levelled the capital down more than any other part of the UK.  As we look to recover from this pandemic we need to see national and local government backing a London recovery plan that is loud and proud about the capital and the role that its domestic and global economies plays in the UK’s prosperity.  Allowing London to be levelled-down will not aid levelling-up the rest of the UK.”

Budget 2021: LCCI’s analysis

The Budget announced several welcome measures that will give businesses much-needed certainty, but gaps remain.

  • Furlough:

With 712,200 now furloughed, London has had the highest number of furloughed staff in England since July (DWP). Its unemployment rate is now estimated at 7% (ONS) - the highest in the UK. The extension of furlough to end of September will give businesses and their employees the much-needed certainty they have been waiting for. Businesses will be required to contribute 10% in July and 20% in August and September. This must be kept under review as the Government assesses the gradual reopening of our economy.

  • Financial support: 

Businesses will be relieved that a cliff-edge has been avoided for the time being, with the 100% business rates holiday extended through to the end of June. Business rates will still be discounted by two thirds for the remaining nine months of the year. Businesses in central London that are dependent on the return of tourism and office workers may need this extended further, and the Government must keep this under review.

VAT relief will also continue until the end of September, with an interim rate of 12.5% to follow for another six months. The standard rate is not set to return until April next year.

Many businesses will also be assured by the targeted support aimed at helping them to reopen. This includes:

  • new Restart Grants, worth up to £18,000 for hospitality, accommodation, leisure, personal care and gym businesses,
  • a new Recovery Loan Scheme to replace the Bounce Back Loan and CBIL schemes, providing loans between £25,001 and £10 million, and asset and invoice finance between £1,000 and £10 million, for businesses of all sizes,
  • much-needed support for theatres, museums and other cultural organisations in England through the Culture Recovery Fund.

For many, however, the cost of doing business in the capital will mean that this support will barely scratch the surface. The top level of business grants for the largest businesses forced to lock down should be extended, along with removal of the cap on discretionary grants to better reflect the high costs of doing business in London.

It was extremely disappointing to see such little targeted support for the aviation industry. We urge the Government to act without delay to introduce further support, namely full business rates relief for airports.

Extension of Stamp Duty relief until September will be a boost to the property and construction sector. But commercial tenants and landlords urgently need the Government to outline a clear solution to address the rent arrears crisis.

  • Support for the self-employed:

The extension of support for the self-employed, along with the ability of newly self-employed to claim income support grants, is welcome. A fourth grant will cover February to April, worth 80% of average trading profits up to £7,500, with a fifth grant to be made available from July.

  • Apprenticeships and traineeships: 

Apprenticeships have an important role to play in supporting our recovery and addressing growing unemployment. Doubling the apprenticeships incentive bonus for businesses to £3,000 for all new hires is a very positive move, as are the additional funding to triple the number of traineeships and the introduction of a new “flexi-job” programme allowing apprentices to work with a number of employers in one sector.

  • Recovery investment: 

Investment in future growth will be a boost to our recovery, and we welcome the Chancellor’s announcement of number of initiatives such as a new management programme for upskilling 30,000 SMEs over three year, a new 25p “super-deduction” in tax from April for each pound invested in new equipment for the next two years, and a “Help to Grow”  scheme of digital support for 100,000 SMEs.

But the hike in corporation tax to 25% will be a sharp hit to many businesses and will be a worry for inward investment. 

While new visa reforms will be a shot in the arm for science, research and tech, and improved visa processes for scale-ups and entrepreneurs are also welcome, businesses across our economy need access to skills at all levels. The Government must engage with industry to address ongoing skills gaps in sectors such as construction and logistics, and growing concerns about future skills gaps in industries like hospitality.

  • What’s in it for London?

We particularly welcome the Government’s plans to position the City of London as the leading market for high quality voluntary carbon offsets. As a world-leading global capital, London must play a critical role in the reduction of global carbon emissions, and we look forward to working with local and national Government on cementing London’s leadership in other areas of greening the global economy.

The announcement of the Thames Freeport will also be a significant boost to the capital’s trade and commerce.

However, London needs a comprehensive plan that recognises its complex importance to the nation as a whole, as well as its crucial role in Global Britain’s evolving relationships with the rest of the world. It was disappointing to see such little mention of the capital in the Budget and its treatment as a subset of nationally applied policies. London’s competitiveness and reputation are critical to the UK’s competitiveness and reputation. Its world-city status is a vital contributor to the wealth of the UK. As such, it is an essential component in the UK’s overall recovery, and we will continue to make the case for recognition of and investment in the capital’s pivotal recovery role.

Furthermore, with talks between the Government and TfL ongoing, we continue to call for a long-term settlement to ensure investment in our capital’s vital transport infrastructure.