Gordon Brown called for emergency measures to support businesses in the budget after new research from the London School of Economics warned nearly a million UK businesses are at risk of failing over the next three month.
The former prime minister said the report’s finding that one in seven businesses – employing 2.5 million people – could be forced to close by spring should serve as a “bugle” for Rishi Sunak as he prepares its tax and expenditure measures for March 3.
Brown, who was Prime Minister at the time of the global financial crisis in 2008, said: “Governments cannot afford to be behind the curve – especially in times of crisis. They must be at least two steps ahead. ”
Using data released by the Office for National Statistics, the LSE report found that UK micro-businesses – those with fewer than 10 employees – are particularly at risk of going bankrupt due to the damage caused by the Covid-19 crisis.
He estimated that 908,000 companies could be classified as at risk because they had no or low confidence in the survival of the next three months. Of this total, 390,000 were registered for VAT and PAYE, while the rest were not registered because their turnover was too low.
The report was prepared for the Alliance for Full Employment, a body founded by Brown that includes tube mayors and Welsh Prime Minister Mark Drakeford.
A separate report by business takeover specialists Begbies Traynor found that 620,000 small and medium-sized enterprises (SMEs) were in “significant financial distress”, putting 2.8 million jobs at risk.
Brown said it was clear many businesses were on the cliff’s edge and that a major collapse would occur without government action.
“If we are to save good, innovative and forward-looking small businesses that, without the help of their investment plans, are at risk of going bankrupt, the budget must include action. It’s time to give new hope to what would otherwise become dying businesses.
Sunak has offered a range of business support since the pandemic arrived in the UK early last year. In addition to the holiday scheme, the Treasury package of measures includes grants, loan guarantees, holiday rate business, postponement of VAT payment and VAT reduction for the hardest hit sectors. .
The LSE report said the Chancellor needed to expand the scale and duration of government support, proposing a continuation of grants on loans; and debt restructuring in the eventual UK takeover, which would involve swapping government loans for government equity.
Professor John Van Reenen, one of the authors of the LSE report, said: “Without further political action, companies face a cruel spring of bankruptcy.”