MPA warns of credit squeeze as economy reopens
‘Cash bridge’ remains at heart of MPA calls on Chancellor for more business support now and into recovery
THE Mineral Products Association (MPA) has written to the Chancellor of the Exchequer having published a policy paper setting out the impact of the coronavirus on the sector and proposing some key policy steps to help get the industry through the crisis and ready to support the recovery.
The paper also warns of an anticipated credit squeeze as the economy reopens – a major risk for those that survive the current shutdown. Around 80–90% of production capacity has been shut down in recent weeks with a small strategic network of sites supplying essential projects including health, road and rail maintenance, agriculture, utilities including water, and other key activities.
All businesses are in survival mode, holding on to cash where possible to keep afloat until the recovery starts and builds back to more economic levels of activity. The MPA believes it will take many months for the pre-crisis cash flow pipelines to settle again with concerns for greater credit risk likely to linger for the rest of 2020 and possibly into next year.
With cash retention being the number-one aim after the safety of employees and customers, the paper calls for several tax reliefs to help businesses hold on to cash. These include a further deferral of VAT, and deferral of employers National Insurance, Corporation Tax and Business Rates.
It also lists some further charges and costs that should be able to be deferred. Greater flexibility and tapering of furloughing will soon need to be evaluated to avoid a ‘cliff edge’ at the end of June that may trigger avoidable redundancies.
The paper also calls for ‘Time to Pay’ arrangements with HMRC for the Aggregates Levy to be more readily available. This tax is falling due now as businesses face a very challenging cash environment and making deferment more easily available would be invaluable, says the MPA.
Nigel Jackson, chief executive of the MPA, said: ‘Our members are in survival mode and have been for some weeks, but they are starting to look ahead. The roll-out of furloughing has been very impressive, averting many redundancies, and the VAT deferral is also very welcome.
‘Extending furloughing beyond June coupled with more flexibility will be needed to avoid avoidable loss of jobs and skills. We have concerns that HMRC are showing limited flexibility over Time to Pay arrangements for the Aggregates Levy, unlike Treasury’s approach to many other costs facing businesses, and call for HMRC to align and become more supportive.
‘Surviving the recovery, when bills will come in faster than payment of invoices for some months, will be another challenge for industry and we need government to provide direct support and to ensure that planned infrastructure goes ahead as soon as possible.’
A copy of the MPA policy paper can be downloaded below.