What weapons does the UK have to fight the effects of coronavirus?

As Coronavirus cases pick up in the UK, policymakers have been seeking an antidote for the potential economic fallout of the pandemic.

The official line has – rightly – been that all options should remain on the table. But what are these options, and how could they help the businesses at the coalface if the situation escalates?

For small businesses, cashflow is paramount. Even firms with profitable operating models may lack the funds to go through an unexpected dry spell. Unfortunately, supply chain disruptions, a potential decline in domestic demand, and wider uncertainty could combine with lost production from quarantined workers to put real strain on companies’ margins in the months ahead.

One of the first priorities for government might therefore be to provide extraordinary support for the inevitable stresses firms would face from falling revenues. Initially, this could be done by extending HMRC’s Time to Pay scheme, employed during the 2008 financial crisis, to enable companies under financial distress to spread their tax payments over a longer timetable. Firms would welcome greater leniency around making their regular VAT, PAYE and corporation tax payments, particularly regarding penalties for missed deadlines. A ‘hardship fund’ for the self-employed and other gig economy workers, not covered by SSP, to access bridging support is also worth exploring.

For some firms, easing compliance-related burdens may not be enough, and there could be a case for government to support wider access to finance if things worsen. Programmes like the British Business Bank’s Enterprise Finance Guarantee, through which the government provides a part guarantee for company loans, could help firms in this regard if banks get tetchy around extending credit. (France is already taking similar steps through BPI France.) Beefing up the BBB directly to lift financing to SMEs might also be an option to get funding to businesses more rapidly.

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Πηγή: capx.co