Coronavirus: Firms urge government for three-month tax holiday from National Insurance, PAYE, and VAT

Major UK businesses including car manufacturers have pressed the government to implement a second wave of urgent financial support to prevent mass lay-offs and company closures as a consequence of the coronavirus pandemic.

In a call with business secretary Alok Sharma on Wednesday, business leaders and company representatives urged immediate action to support cash-flow and jobs.

They urged the government to grant an immediate three-month tax holiday from National Insurance, PAYE, and VAT, in addition to relief on business rates.

This would help support cash-flow hit by a sudden and huge decline in consumer demand, driven in large part by social distancing measures required to tackle the virus.

There were also calls for the government to provide direct support to pay employee wages, in line with the German model of “short-time pay”, in which around 60% of salaries are funded by the state during periods of unusually low demand.

The Society for Motor Manufacturers and Trades wrote to the Treasury on Wednesday, recommending the measures it believes are necessary to ensure that the car industry and associated trades can bounce back when the current crisis passes.

Every UK car company with the exception of Jaguar Land Rover has paused production as a consequence of the coronavirus outbreak, largely to protect workers and the risk of increasing infection rates.

PSA, which owns Vauxhall, halted production at its Luton and Ellesmere Port plants this week until Friday 27, with staff retained on full pay. Honda, BMW and Toyota have taken similar steps.

Industry sources believe that the government is seriously considering the measures they recommended to try and head off the deepening economic crisis.

A host of other sectors have also called for support, including the hospitality industry in which large scale lay-offs are already underway as people stay away from restaurants, pubs and cafes.

On Tuesday, Chancellor Rishi Sunak announced a range of measures to support businesses in addition to those set out in his first Budget just eight days ago.

These were largely based on government backing for up to £330bn of loans to companies struggling because of the coronavirus, and he faced immediate calls to provide direct support rather than committing businesses to indebtedness.

In the House of Commons former business secretary Greg Clark urged the government to pay wages if companies agreed to keep workers on.

“At a stroke this would save jobs, save businesses and put an immediate end to the contagion and help save the economy,” he said.

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