SNP's budget demand: Cut tax for firms most at risk from coronavirus

He has recommended the Chancellor mirror moves made by the Irish Government in 2011, amid the financial crash, which helped companies stay afloat. Among those proposed would be a temporary 5% drop in the rate of VAT paid by businesses in the relevant sectors, taking their tax bill to 15% instead of the standard 20%.

Speaking exclusively to The Herald on Sunday, Blackford said the Government must step in to help ensure firms do not follow in the footsteps of Flybe which collapsed this week following months of financial turmoil.

The airline was finally shuttered on Thursday citing a fall in bookings due to the Covid-19 outbreak, and disagreements over the terms of a publicly-funded £100 million loan offered by the Government. Blackford said: "Over the coming days and weeks, our tourism and hospitality sector is facing a difficult climate with reduced customers because of the coronavirus outbreak.

"I am calling on the UK government to set out a package of measures to assist these businesses during this time, as well as action from the banks to help mitigate the economic impact.

"This is about reducing the cost of current business activities – orders, supplies and bookings – while these businesses see a temporary drop in tourist numbers as people follow public health guidelines.

"We have already seen the effects coronavirus is having on the tourism sector with the collapse of Flybe. "

The UK already has the second highest VAT rate for hotel accommodation, and the seventh highest rate for restaurant and catering services in the EU – indeed 25 EU countries already apply a discounted VAT rate to hotel accommodation and cultural services.

The MP said that lowering the tax rate would also help businesses get ready for the new immigration proposals which come into force in January 2021. The plans, announced by Priti Patel, are predicted to devastated rural Scottish firms as well as those in tourism, hospitality, agriculture and care as the typical salary for jobs in those industries falls well below the £25,600 required by the government for visas.

Experts and the Scottish Government have expressed concern about the plans and say Scotland is in a unique situation where it relies on migration to boost the population.

Many firms have said they will not be able to recruit enough workers, and on Friday Scottish Secretary Alister Jack acknowledged there was still work to be done on the policy, saying there were "difficulties" to be addressed.

Blackford's call for a tax cut has been a long-running issue for the SNP, which included similar measures in the party manifesto of 2017.

Three years ago it called on the UK government "to examine a reduction in VAT for the hospitality sector, levelling the playing field with other EU nations and creating new jobs."

The MP explained: "Many businesses in the tourism and hospitality sector were already facing an uncertain season as they grapple with the UK's new immigration rules which has made it harder for them to recruit staff. The outbreak of coronavirus is creating even more uncertainty and concern for these businesses which rely on getting customers through their doors.

"In the UK government's budget next week, there must be specific measures to protect these businesses, jobs and livelihoods. A drop in VAT to 5 per cent is ambitious, but it should offer real protection in the short-term to help these businesses weather the storm."

Industry leaders are already warning of the consequences of coronavirus, and suggest they are currently in the dark about what is to come. Fraser Grieve, Highland director of the Scottish Council for Development and Industry, has said: “Forward bookings are obviously not what the hospitality and leisure business hoped for and it is challenging because there is so little clarity on what the outcome will be.

"Everyday things are tightening up and making things difficult regarding travel, and I suspect it will tighten up more in the future. It is not a good position to be in."

Along with a plea to the Government's new Chancellor, Blackford has also written to banking chiefs urging them to ensure their businesses "have sufficient working capital" to be able to withstand the changing markets amid the virus pandemic.

The Westminster leader has written to the chief executives of six banks – Barclays, Clydesdale, HSBC, Lloyds, Santander and RBS – saying it is "incumbent on us all to minimise the economic consequences on workers and firms".

Read more:  Scottish firms call for bank leeway as economy fears grow

In the letter, he outlined what banks in Italy were doing to help, and urged British ones to follow suit. He wrote: "Domestic banks must ensure businesses have access to sufficient working capital to tide them over this period. Many firms with solid business plans will this year face time-limited reductions in custom. Given they should expect a marked turn up in the books after coronavirus abates, banks such as yours should provide them with sufficient finance to ensure they can remain in operation during any lull in business.

"The Italian Government will now provide a guarantee on corporate debt in the areas and industries affected by coronavirus.

"Whilst the UK Government should certainly follow their lead, your bank's social responsibility obligations mean that you have a key role in supporting the sectors affected and that means you should immediately ensure they have access to working capital.

"It is vital that we all work together to minimise the economic consequences of this outbreak and as such I would welcome you to a meeting to discuss how we can best move forward."

He has also invited the banking leaders to meet with him to discuss what obligations he believes they have to minimise the consequences of the virus to ordinary firms and people.