The Finance and Leasing Association (FLA) has urged Government to not ‘prematurely end’ its COVID-19 finance support for UK business in a co-signed letter to Chancellor of the Exchequer Rishi Sunak.
FLA director general, Stephen Hadrill, signed a letter co-signed by leaders from the British Vehicle and Rental Leasing Association (BVRLA), Association of Alternative Business Finance, Consumer Credit Association, Credit Services Association and Innovate Finance today (September 22).
In the letter – designed to be a lobbying tool ahead of the Chancellor’s Comprehensive Spending Review (CSR) – the six trade associations urged Sunak to consider carefully the option of continuing the support schemes which have provided “a lifeline to businesses across the UK”.
The letter is a continuation of the FLA’s efforts to lobby Government following a roundtable event with Paul Scully MP, Minister for Small Business, hosted alongside the Association of Chartered Certified Accountants (ACCA) last Friday (September 18).
In today’s letter, the FLA and its co-signatories said that the UK economy had started to recover as a result of finance lending to businesses in the wake of the COVID-19 lockdown period.
It said: “Lending to businesses has increased from its low point in the Spring, the housing market is strong, and the motor market is returning to pre-crisis levels.”
The letter added: “Nevertheless, we are still in very difficult circumstances. We simply do not know what course the pandemic will take.
“Whilst we may not face another national lockdown, we do face a series of local and tailored restrictions.
“These damage very large numbers of businesses and, by adding to uncertainty, deter investment.
“Now is not the time for the British Business Bank to curtail its support schemes, not least because its schemes, unlike the Bank of England’s, channel funding and risk reducing guarantees through non-bank lenders.
“These lenders have a strong track record of serving SMEs before and during the crisis and need to keep doing so. The Bank of England’s scheme for banks runs into the Spring. The support for non-banks should do likewise.”
The six trade bodies cited insight from TheCityUK which suggested that 780,000 SMEs will have unsustainable levels of debt by next Spring.
It said: “Not all can or should be saved. However, many businesses do deserve to survive, and the economy needs them to do so. Longer term schemes are needed to help those we need most.”
Rishi Sunak launched the Government’s Comprehensive Spending review in July.
The review will set UK Government departments’ resource budgets for the years 2021/22 to 2023/24 and capital budgets for the years 2021/22 until 2024/25, and devolved administrations’ block grants for the same period.
Among its priorities will be: strengthening the UK’s economic recovery from COVID-19; levelling up economic opportunity across all nations and regions; improving outcomes in public services, including supporting the NHS and taking steps to cut crime; making the UK a scientific superpower, including leading in the development of technologies that will support Government’s ambition to reach net zero carbon emissions by 2050.
The FLA’s key recommendations for the CSR, outlined last week, expand on these points. They are:
Level up the regions – this will ultimately increase productivity, so the FLA will be recommending that key features of the temporary Coronavirus Business Interruption Loan Scheme (CBILS) – such as the 80% Government guarantee – are transferred to the existing asset finance variant of the Enterprise Finance Guarantee Scheme to improve its effectiveness in channelling finance to businesses for capital investment, like new equipment or software.
Increase the take up of ultra-low emission vehicles (ULEVs) – the FLA’s members currently fund 94% of all new cars purchased by consumers, so finance is critical to the rollout of ULEVs. Currently, capital allowances and the Annual Investment Allowance cannot be claimed by finance and leasing companies which purchase vehicles and lease them to businesses and consumers. If lenders, including leasing companies, could offset the purchase price of electric vehicles against their tax position, this would enable them to offer much more competitively priced finance or rental payments for ULEVs, putting them within the reach of more consumers and fast tracking the UK’s progress towards zero emissions.