Furlough flexibility welcome but more support needed

Trade body UK Hospitality has welcomed the UK government’s move to increase flexibility of the furlough scheme from July when parts of the on-trade will hopefully be allowed to reopen.

The UK’s Coronavirus Job Retention Scheme was due to end in July, but was extended to October. Under the scheme, which was announced on 20 March, the government pays for 80% of wages for employees who are not working, up to £2,500 (US$2,900) a month.

In the latest coronavirus press conference on Friday evening (29 May), UK chancellor Rishi Sunak announced a new update to the furlough scheme. From August, employers will be asked to pay national insurance and pension contributions, then from September, employees will be told to pay 10% of furlough wages with the government covering 70%, and from October, employees will be asked to pay 20%, with the government covering 60%.

Previously, UK prime minister Boris Johnson said parts of the nation’s hospitality industry could reopen as early as July.

UK Hospitality said the furlough update was a “positive and pragmatic step towards reopening the economy while recognising that this recovery will take time, particularly in hospitality”.

The trade group’s chief executive, Kate Nicholls, said: “Giving businesses increased flexibility from the start of July is extremely welcome as hospitality looks to reopen its doors to the public.

“The move, which UK Hospitality had been calling for, will allow more people back to work on a part-time basis and help venues ensure safety for customers and staff.

“Flexibility is going to be crucial if businesses are to open and be economically viable with social distancing measures in place.

“The introduction of employer contributions to the scheme from August will put some businesses under particular strain, but the way it is tapered allows for a gradual adjustment. Further support for the self-employed is also helpful for many in our sector.”

However, Nicholls said the government must acknowledge the costs will be hard for hospitality firms to bear.

As such, the government should “consider other measures to support the sector” Nicholls warned, such as “brokering a solution on rents, with Treasury contributions if necessary, and considering further grants to support businesses to reopen”.

Nicholls continued: “If we can find a solution on rents and get an extension of the grant scheme, this will mitigate much of the impact of the reduced furlough. If we do not, a very difficult spring would become a disastrous summer for hospitality.

“We hope the government bears in mind that many high street businesses will be reopening in the next couple of weeks, whereas hospitality will be forced to survive for an additional month, at the very least, on this reduced form of furlough.”

From 15 June, non-essential stores in England will be able to reopen. No dates have been set for the reopening of shops in Scotland, Wales and Northern Ireland.

Supply problem

Trade body the Wine and Spirit Trade Association (WSTA) also welcomed Sunak’s announcement, which provides “much needed flexibility sooner” for businesses.

Miles Beale, chief executive of WSTA, called the scheme “a lifeline for wine and spirit businesses – especially those who predominantly supply pubs, bars and restaurants”.

He said: “The scheme has so far been generous and the plan to phase in employer contributions is fair – provided that pubs, bars and restaurants are able to open and operate viably.”

Beale also called for additional support for the industry, in particular suppliers, which currently do not have access to the same help as other businesses.

He continued: “Unless and until all hospitality businesses are permitted to operate at full capacity, the government should hold open the prospect of additional support to offset any restrictions it needs to impose for public health reasons.

“The government must not forget the smaller number of lower-profile businesses that supply into high street hospitality. So far, they have not been able to access all existing support that is available to hospitality businesses, even though their sales have also reduced to zero.

“Current guidance must be amended quickly to clarify that they should also have access to the business rates exemption. If not, I am afraid that there will be business closures and redundancies – and potentially a supply problem for recovering high street hospitality outlets.”

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Author: Nicola Carruthers {authorlink}