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UK business leaders are today calling for more than £10bn in tax cuts plus accelerated public building works in an emergency package of measures aimed at preventing more firms and jobs being swept away by the economic downturn.
The CBI wants employers' national insurance contributions (NICs) to be slashed and a freeze on business rates as part of a 10-point plan to boost recovery. The urgency of its case is indicated by a poll showing a huge downturn in working capital availability for firms and a separate warning that 300,000 construction jobs could be lost over the next 12 months.
The CBI said the government should also step in to act as an insurer of last resort at a time when some companies are finding trade credit insurance is being suddenly withdrawn from suppliers.
"We need to keep businesses working to safeguard jobs and we need to act now. The biggest threat hanging over businesses is their cash flow. If they cannot get their hands on the cash and credit they need to go about their day-to-day business, there is a real risk we could see healthy firms go under," said Richard Lambert, director-general of the CBI.
"The next six months will be critical. If we are to stand a fighting chance of preventing this recession from becoming longer and more painful, we need to act now to get the credit markets working properly," he added.
The 10-point plan - the most expensive element of which is a £9bn cut in NICs by 1.8 percentage points to 11% - came as the organisation published the results of a new Ipsos/Mori poll which showed that half of all businesses were reporting a reduction in the availability of working capital and three-quarters were expecting the situation to worsen.
The online survey, which covered more than 200 firms of all sizes and across every sector, reported that two-thirds had seen stringent new conditions imposed on them by lenders and one-third had seen a reduction or complete withdrawal of credit lines. Smaller businesses were particularly badly affected.
The survey makes it clear that the dramatic change in commercial conditions over the past couple of months had significantly hit commercial expectations for 2009. In October, 74% of businesses expected conditions to worsen next year, while a month later that figure rose to 78%, with only 10% expecting improvement.
These negative results prompted the CBI to call for government initiatives, including an agreement to make up pension deficits more slowly and the scrapping of empty property relief rates. The organisation also wants proposed business rate supplements - other than for Crossrail - delayed in a move which would potentially save firms an extra £800m. It also wants the chancellor to bring forward planned public capital spending programmes, such as the Building Schools for the Future scheme and social housing initiatives.
The calls came as the Royal Institution of Chartered Surveyors (RICS) claimed that new orders for the construction sector were down by one-third from their recent high and were likely to fall in the coming months as confidence continues to erode. RICS also said the number of building workers was likely to drop by 14% from peak to trough, wiping out 300,000 jobs, unless immediate action is taken to kickstart new construction projects such as schools, hospitals and the transport network.
The CBI's 10-point economic recovery plan
1 Employers' National Insurance Contributions to be cut by 1.8% to 11%
2 Temporary freeze on business rates and business rate supplements
3 Delay next rise in corporation tax for small and medium-sized businesses
4 Delay in firms having to make good their pension schemes
5 Bank of England to improve liquidity in the commercial paper market as has been done in the US
6 Bank of England to act as trade credit insurer of last resort
7 Help to avoid creating "going concern uncertainty" in accounts
8 Accelerated public spending on earmarked building schemes
9 Government incentives to small companies to take on apprentices
10 Public financial support for firms with problems borrowing from banks
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