Outside restaurant in winter

What does the Chancellor’s Winter Economy Plan hold for Hospitality Businesses?

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On 24 September Chancellor Rishi Sunak announced an eagerly awaited raft of additional business support measures to help protect jobs from the impact of the Coronavirus.

It was no surprise to hear that the furlough scheme would definitely end and he said it was “fundamentally wrong” to keep people in unviable jobs. In a recent survey of over 200 hospitality businesses we found that 35% of businesses were already expecting to make redundancies before the end of October and 32% were are still deciding.  Without any further support that may have been an inevitable outcome, however, the Chancellor has announced a new Job Support Scheme (JSS) which is aimed at helping businesses protect those jobs.

The new Job Support Scheme will be a six month scheme starting on 1 November 2020 which will top up an individual’s wages where they are working at least a third of their hours. A third of the balance will then be made up by the employer and another third by the government. This means an employee working a third of their hours will get 77% of their normal pay; 55% of this is covered by the employer and 22% is covered by the government. The employer can also claim the job retention bonus - as long as they qualify for that. Larger businesses will need to prove they have been adversely affected by Coronavirus to be eligible. The scheme will open on 1 November 2020 and will run for six months. Further guidance will be published shortly.

The Shadow Chancellor Anneliese Dodds asked if this would incentivise short-term working to protect jobs, employers possibly favouring saving full-time jobs and losing numbers of people working shorter hours. Rishi Sunak suggested it certainly would still incentivise short-term working, something which is prevalent in the hospitality sector of course. The problem is that many hospitality businesses - particularly pubs and those in the night time economy - know their demand will return as soon as it is allowed to, but this won’t be enough to save the jobs in the short term.

Other measures included the extension of the Self Employed Income Support Scheme (SEISS), an extension of the VAT reduction for accommodation, hospitality and attraction businesses to 31 March 2020, and the ability to defer VAT payments not made in summer past March 2021 – over 11 months.

Extra measures to aid cash flow also included adjustments to the Bounce Back Loan and Coronavirus Business Interruption Loans (CBILS). Bounce Back loans can now be extended from six to ten years, reducing the average monthly repayment, and businesses who are struggling can now choose to make interest-only payments, with anyone in “real trouble” able to apply to suspend repayments altogether for up to six months.

On the CBILS, the government guarantee will be extended for up to ten years, making it easier for lenders to give people more time to repay. The deadline of all loan schemes has been extended to 30 November and they are working on a new successor loan programme, set to begin in January.

For some the loan scheme extensions will be the most welcome adjustment, for others it will be the JSS that is key to getting through winter. The CBI believes the Treasury has broadly struck the right balance between supporting viable jobs and ensuring the sustainability of public finances, listening to evidence from businesses and unions. However, there is still a huge gap where small businesses haven’t been able to access the SEISS or the furlough scheme; particularly small owner managed limited companies.

80% of hospitality businesses we surveyed accessed the furlough scheme and 64% of respondents suggested that the phasing out of the furlough scheme would put their business under significant financial threat. It’s clear that there will be less uptake of the new JSS in the hospitality and leisure sector as it doesn’t fit the imminent needs of businesses trying to protect those jobs until they are allowed to cater for more people again and return to normal opening hours. Further business support for the sector is inevitable if restrictions are not eased soon, but it remains to be seen what that will include and when it will be forthcoming. For the 87% of hospitality businesses we surveyed which said cash flow would be a major issue for their business over the winter months, we can only hope the tighter restrictions recently implemented don’t last as long as its suggested they could.


If you'd like more information or advice on the current support measures in place for Hospitality business, please get in touch with Richard Askew on 07887 844342 or email using the link below.

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