Business leaders are calling for financial support from the Government amid a wave of cancellations and lost earnings as customers act on the spread of the Covid-19 omicron variant.
Chancellor Rishi Sunak has cut short a trip to the states for urgent talks with business groups who are warning that businesses, particularly in hospitality and retail will face financial ruin as revenues are decimated at what should be their busiest time of year.
On Tuesday, December 21 - Sunak announced a £1billion support package for businesses including support grants and the return of the statutory sick pay rebate scheme.
The Government has not insisted that businesses should close but as customers take matters into their own hands amid warnings from England's Chief Medical officer Prof. Chris Whitty to think twice about socialising, the net result is the same with empty shops, cancelled appointments, restaurant and hotel bookings.
Celebrity chef Tom Kerridge took to social media to demonstrate the problems restaurateurs are facing with an instagram post detailing how cancellations amounted to £65,000 in lost earnings.
In an , we are asking followers what support they would like to see for crisis-hit businesses.
This is the voting so far - 40% said they would like to see a return of furlough, 30% wanted an extension of VAT and business rate relief and 24% want the Government to consider the reintroduction of short term grants or loans.
BusinessLive takes a look at the support that business groups have been asking for.
Furlough
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While no business is being told they must close in under these new Plan B restrictions, people are effectively making the decision themselves to stay away, as is evident by the cancellations across pubs, restaurants, hotels and theatres.
A new report by the Resolution Foundation The new wave: The economic policy response to Omicron argues for the .
Authors Torsten Bell and Jack Leslie state: "The top priority is to support household living standards through a difficult winter. Targeted furlough, available to firms hard hit by the latest wave, is the best way to achieve that objective whether or not new restrictions are imminently imposed.
"We have an existing scheme (the Coronavirus Job Retention Scheme) that can easily be brought back into use quickly. Claims that sectoral targeting is hard are overdone: that is exactly what we did with targeted grants through 2021. And targeting can be done via threshold tests rather than sectoral definitions, such as the premises being closed or VAT returns showing at least a 50 per cent fall in revenue ( ).
"A higher basic rate of UC would clearly be desirable, but there is little prospect of the Chancellor considering it having so recently cut it and spent some of the savings on more generous entitlements for those in work."
They calculate that re-introducing furlough, at 80 per cent of previous earnings, would imply a cost of around £1.4 billion a month against a backdrop £46 billion of furlough spending to date.
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Business rate relief
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Real estate experts at Colliers say that the do not go far enough to protect the big chains being hit by Omicron cancellations.
They say that calls from Prof. Whitty for people to scale back their Christmas plans has had a massive knock-on impact on the retail, hospitality and leisure sectors, which now urgently need Government support.
Colliers says the Government must step in to financially support the sector, which is only just getting off its knees following the extremely difficult 21 months since Covid-19 first struck.
John Webber Head of Business Rates at Colliers said: “Although we are not yet in an official lockdown as such as we saw at the beginning of the year, we might as well be for the impact the Government’s public health messaging is having on public behaviour. With calls to work from home as much as possible and to reduce socialising yet again, the retail/ hospitality industry is losing custom at a rate of knots, costing billions of pounds.
"This time last year, businesses in this sector were receiving subsidies via the furlough scheme, a 100% business rates relief on the properties they occupied and were in receipt of substantial government grants. Now with the furlough scheme ended and the sector only receiving a capped two thirds discount to their business rates bills, financial support is much more sketchy.
"The £2 million cap on rates relief per business that came in after June has meant relief is very limited for the larger chains- the ones responsible for the bulk of employment in the sector."
Wetherspoon pub boss Tim Martin has echoed the calls.
He called for VAT and rate relief, saying: “If it wants to keep pubs in business – Wetherspoon alone paid one pound in every thousand of tax collected by the Government in 2019 (three quarters of a billion pounds) – it should eliminate VAT on pub food, which it already does for supermarkets, and make that permanent.
“It should also eliminate business rates until Covid restrictions end completely.
“If it does these two things it might preserve one of its biggest sources of employment and tax – namely, pubs.”
VAT
Firms across the sector are asking for an extension of the discounted 12.5% VAT, which is due to revert back to the original 20% rate in March next year.
海角视频 Hospitality boss Kate Nicholls and pub chiefs have made a plea for business rates relief and VAT discounts to be extended, warning that the sector has been knocked harder than expected by the new restrictions.
Ms Nicholls said hospitality sales have already plunged by more than a third over the past 10 days with £2 billion of trade already lost in December.
Consumer confidence has been knocked by new restrictions and increasing health warnings.
England’s chief medical officer Professor Chris Whitty has advised Britons to consider cutting back on socialising around Christmas, while Prime Minister Boris Johnson said people should “think carefully” before going out to celebrate.
Ms Nicholls said: “Christmas trade is always crucial for the hospitality industry, making up as much as a quarter of the year’s profit for many businesses.
“Last year, Christmas was cancelled and so much rested on this December period for businesses already staggering under a burden of debt incurred from the pandemic and facing rising costs across the board.
“If operators are unable to trade profitably over the next month, many will simply not survive – and those that do make it through face a return to 20% VAT in April.
“The Government must step in now and provide measures that support the businesses and jobs in the sector – by committing to keeping VAT at 12.5%, suspending business rates payments for the first quarter of 2022 and reinstating recovery grants.”
Loans and grants
The Government's recovery loan scheme is still in place - designed to support businesses affected by restrictions.
It offers 80% government guarantee and interest rate cap for businesses and is available until 30 June 2022.
However, as things stand, from 1 January 2022, the following changes will come into force:
- The scheme will only be open to small and medium sized enterprises
- The maximum amount of finance available will be £2 million per business
- The guarantee coverage that the government will provide to lenders will be reduced to 70%
The Recovery Loan Scheme replaces the Bounce Back Loan Scheme, Coronavirus Business Interruption Loan Scheme, and the Coronavirus Large Business Interruption Loan Scheme.
As part of a series of measures, the CBI is also calling on the government to ensure unspent grants, currently distributed at local government level, go to businesses most in need.
Rain Newton-Smith, CBI Chief Economist, said: “The onset of omicron means many businesses seeking to get back on their feet are once again reeling from the virus for a second Christmas in a row. Now the Government must act at speed to prevent the need for further restrictions.
“Cash is king, so helping affected firms with cashflow, by ensuring unspent local authority grants are distributed to firms, giving firms more headroom to manage their coronavirus debt repayments and considering measures to reduce the fixed costs of businesses where demand is severely affected should be on the table. Meanwhile creating feedback loops for business, government and unions as the Omicron wave continues will be vital for assessing the impact of restrictions and the need for future support.
“Clearer communications must characterise this next phase of living with the virus and its variants. The Government’s decision to take swift action in response to the emergence of the Omicron variant was the right one. But the speed of the response gave way to a lack of clarity, leading to greater confusion, uncertainty, and concern. "