Why the Government needs to act now with support measures for businesses facing escalating costs - Ismail Mulla

By this stage it is impossible to ignore the gathering economic storm clouds. Many business owners I speak to are either cautious or really concerned about the future.

You only had to read today's report from the manufacturers organisation Make UK, which warned of a potent cocktail of escalating costs amidst a worsening economic situation.

Businesses are facing sky-high energy costs, inflation is on the up and trade is increasingly becoming uncertain. Add to that a really tight labour market.

It’s simply not sustainable to expect businesses to shoulder the burden. They need help and they need help now.

The Chancellor must take action now.

The Chancellor Rishi Sunak has promised to look at a package of support in the autumn but as the Make UK report says, it could be too late by then.

Dawn Huntrod, director for the North of Make UK, said: “Whilst industry has recovered strongly over the last year we are clearly heading for very stormy waters in the face of eye watering costs and a difficult international environment. Clearly some of the factors impacting companies are global and cannot be contained by the UK Government alone.

“However, just as it is quite rightly taking measures to protect the least well off, it must take immediate measures to help shield companies from the worst impact of escalating costs and help protect jobs.”

Businesses have had to navigate uncharted waters over the past couple of years and while they have had highly welcomed Covid support from the Government, now is not the time to deflate the life rafts or else they will be cast adrift. The consequences for workers are unthinkable.

Make UK and professional services firm BDO’s recent Manufacturing Outlook survey showed growth and orders slowing significantly with exports nosediving and investment flat. The warning signs are there. We need to take action now to head off an even bigger crisis come the winter.

The Government should announce a waiver or at the very least a reduction in business rates for the next year or so. It also should look at VAT deferrals.

One of Make UK’s recommendations is for the Government to review the efficacy of the business interruption loan schemes introduced during the pandemic and deploy a successor scheme by the third quarter.

Steve Talbot, head of manufacturing at BDO in Yorkshire, said: “Rapidly rising input costs, ballooning energy bills and in some cases inflation-busting pay settlements have hit margins and slowed investment plans.

“There is now a strong case for Government action to help manufacturers weather the immediate storm and incentivise investment for long-term growth.”

While I’m aware that there is a need for fiscal prudence especially as we emerge from the pandemic, we won’t have a recovery unless businesses are on a sure footing.

The National Institute of Economic and Social Research (NIESR) is forecasting two consecutive quarters of contraction, a common definition of a recession, in the UK.

Last month, when I spoke to American banker Bob Diamond, he agreed that there was likely to be a recession both here and in the US.

He said: “The important thing is it’s a reasonably mild recession. Let’s keep in mind that there is going to be a recession ahead. There’s always a cycle. It can’t always be growth. The question is how effectively do we manage through that period of recession.”

Businesses that are strong and stable, to borrow the former Prime Minister’s phrase, will be central to managing through any recession.

My biggest concern is for this region’s small businesses. They are the lifeblood of not only our economy but of our communities.

Whenever I talk to a small business owner, their biggest concern is looking after their staff. They don’t just simply cut jobs to maintain a healthy balance sheet. Although I fear some may inevitably have to take this route.

These firms are the soul of our nation. They take great pride in their values. It’s about innovation and doing things better. More often than not financial gains are a secondary motivation for them.

It’s important that these SMEs get the support in the immediate future. The Government owes it to them.