The Institute of Directors is calling on the Government to use its upcoming Economic Statement to ‘pump-prime’ the economy and support employment.
In a submission to the Treasury, the IoD warned of potential job losses as the furlough scheme winds down, and urged the Government to act now to reduce the cost of employing people, for example by increasing the Employment Allowance and raising the threshold for Employers’ NICs.
According to new figures released by the Institute, in a survey of over 700 company directors following the publication of government guidance, a quarter said their firm would be operating at less than half capacity under social distancing. The IoD’s latest Confidence Tracker showed that directors’ hiring and investment intentions for the year ahead have hit new record lows.
The business leaders’ group is also pressing for measures to support business investment. Recommended policies included widening the scope of tax breaks for research and development activity, something proposed in the 2019 Conservative Manifesto, to support firms in making digital and other productivity-enhancing investment.
Jonathan Geldart, Director General of the Institute of Directors, said:
"The July statement provides a perfect opportunity to pump-prime the economy for recovery.
"The Government may want to hold back some ammunition until the Autumn, but directors have to make hiring and investment plans ahead of time. Now is the moment for the Treasury to reduce the cost of employment so companies can retain staff. As the furlough scheme winds down, jobs are at risk, so it will be crucial to soften the blow.
“Businesses will face another cash crunch as they try to adjust and reopen, and many expect that social distancing will mean lower revenues for some time. With lots of debt sloshing around the system, investment will be suppressed, and this will hold back our recovery for the medium term. The quicker we start to deal with that challenge, the quicker our recovery can be.”
Key policies from the IoD's submission include:
- Business investment incentives: Widen the scope of R&D tax reliefs to support investment in technology, training, and in adapting their business models.
- Reducing employment costs: Raising the Employment Allowance and more broadly thresholds for Employers NICs, would support retention and hiring during the recovery.
- A ‘Recovery Grant’ scheme: The Discretionary Grant fund should be increased and expanded to extend grants to businesses that have not yet received support during the crisis, need to cover ongoing costs, or require costly workplace adjustments for social distancing.
- Support scale- and start-up investment: The Enterprise Investment Scheme and Seed Enterprise Investment Scheme reliefs should be made more generous, accessible, and simple.
- Easing the burden of business debt: Forthcoming debt interest payments will restrain firms' recovery and investment prospects. Government should consult on restructuring loans so firms can return to growth and make repayments.