Chancellor Rishi Sunak is said to be considering an extend the emerging Covid-19 loan scheme in next week’s autumn budget.
The Recovery Loan Scheme which backs 80 per cent of the value of a loan extended to businesses struggling with the impact of the pandemic, was scheduled to finish on December 31, however Mr Sunak is reportedly proposing to grant an extension.
The news was first reported by Bloomberg, with sources allegedly telling the news organisation consultations on the matter are ongoing.
Covid-19 loan schemes helped businesses remain solvent during the pandemic, as businesses, particularly the hospitality sector were forced to close their doors.
Rising input prices have fuelled inflationary pressures in the economy, August brought the first full month of restriction-free trading for UK hospitality businesses since March 2020.
The continued return of customers to restaurants, pubs, bars and other premises increased demand for many food and drink items, and further fuelled price inflation.
Price rises were significantly higher than the 1.2% in some key categories of the Foodservice Price Index, including Soft Drinks. As staff, logistics and import costs continue to rise, the Index predicts continued inflation over the remainder of 2021 and well into 2022, with the rate of rises likely to increase sharply in the short term.
Mike Cherry, National Chairman of the Federation of Small Businesses, which had called for the Chancellor to extend the loans plan, said the move “will help firms access finance as they try and manage inflation, staff shortages, spiralling energy costs and supply problems.”
Latest data released by the Office for National Statistics released today shows inflation edged back to 3.1 per cent in September, down from 3.2 per cent in August.
Commenting on latest inflation figures, Kate Nicholls, Chief Executive of UKHospitality said: “Today’s inflation figures are extremely concerning for the sector, with costs for hospitality businesses across all lines rising by 11-13%. Such rising costs have the potential to seriously derail the sector’s recovery – and its ability to boost national recovery – due to a heady cocktail of substantial increases in the cost of essential goods and services crucial to their businesses.
“Combined with suppressed sales due to labour shortages, it is inevitable that businesses will have no choice but to pass on some of this pressure to their customers through higher prices. Consequently, we urge the Chancellor not to compound matters with tax increases in the form of business rates and a return to historic rates of VAT. Locking in the 12.5% rate of VAT for the long term for hospitality will avoid building in more sustained inflationary pressures across the economy.”
The Recovery Loan Scheme backs 80 per cent of the value of a loan extended to businesses struggling with the impact of the pandemic.