The Make UK industry lobby is asking the government for an immediate deferment of all value-added tax, social security and payroll taxes to fight the possibility of mass layoffs of skilled workers. The measures should initially last three months with the option to extend them if it is judged to be necessary, the group said in the statement.
Other measures being sought include extending government financial support for sick pay — which is usually paid by the employer — and financial support for laid-off workers' wages similar to programs in Germany, where the federal government subsidizes more than half of the worker's wages in times of crisis.
"There are alarm bells going off right across the manufacturing sector with the prospect of substantial layoffs looming," said Make UK's chief executive, Stephen Phipson. "Order books are collapsing and this is creating immediate cash-flow issues for companies, which need addressing within days, not weeks."
Make UK said a series of fiscal stimulus measures to support business announced by Chancellor of the Exchequer Rishi Sunak on Tuesday, including business credit guarantees and mortgage forgiveness, would take time to feed through into the system. Tax relief, by contrast, would have a more immediate impact, help employers' cash flow and enable them to retain staff members, Make UK said.
The trade group's statement came amid growing criticism of the perceived lackluster response to the economic effect of the coronavirus by the U.K. government compared with the rest of Europe. Europe's largest economies have all announced major tax relief measures to help businesses affected by the economic fallout, with the backing of the European Union.
European Commission President Ursula von der Leyen said last week that countries subject to EU law — which the U.K. is until the end of the year — "should feel comfortable to take any measures they need" to support their economies and that the commission would provide "maximum flexibility" on the application of state aid and fiscal rules.
A number of EU countries have already announced tax holidays for companies adversely affected by the coronavirus, also known as COVID-19. Italy, which has been hit hardest, was the first to do so at the beginning of March, announcing tax credits for companies that report a 25% drop in revenue, as well as a series of tax cuts.
Italy has also closed its tax administration until further notice, suspending collection of VAT and other tax payments for businesses.
The largest economy, Germany, has also introduced temporary tax measures including the lowering of VAT rates.
France has suspended collection of tax payments and President Emmanuel Macron announced a series of tax and spending measures — including suspension of other debt payments for businesses and individuals.
HM Treasury has not yet responded to a request for comment.
--Editing by Tom Mudd.
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