Shutdown shocks local economies: UK businesses respond to Chancellor’s local lockdown and JSS extension plans

Are hospitality businesses prepared for a local lockdown
Chancellor Rishi Sunak announced the extension of its Job Support Scheme to those businesses legally required to close.

He also introduced new economic measures to support businesses in local lockdown. Here, UK business owners and legal experts respond.

Read the news article here: https://realbusiness.co.uk/will-job-support-scheme-expansion-work/

Highlights

  • The Government will pay two thirds of the wages of employees who are unable to work because they are in businesses which are legally required to close due to stricter lockdown measures.
  • The scheme will start on November 1st and run for six months with a review in January.
  • Until November businesses that are asked to close can continue to use the furlough scheme.
  • The grants will be paid up to a maximum of £2,100 per employee a month and the Treasury said they will protect jobs and enable businesses to reopen quickly once restrictions are lifted.
  • The announcement follows calls, largely from the pub and hospitality industry, following recent curbs to opening hours and anticipated further lockdown restrictions on the way, particularly in the North of England.
  • There will also be an increase of up to £3,000 for business grants to assist affected businesses.

The hospitality sector is the hardest hit

Those in the hospitality sector had to survive months of lockdown with zero turnover (save for some take-out food sales), had a reprieve for a few weeks, which was then curbed to 10pm to 5am closing times and now pubs and restaurants in high risk areas in England are facing another forced lockdown,” Alan Lewis, partner at Constantine Law said.

The furlough scheme and flexible furlough scheme went some way to preventing large scale redundancies but we have not even seen the start of the Job Support Scheme (due to begin on 1 November), he explains. “It is reassuring to see some help for employers in the pub and restaurant trade in these high risk areas.”

However the Chancellor has admitted he does not know what the take up will be and what the cost of this expanded JSS will involve.

“Employers will need to ensure they agree changes to working hours with staff, otherwise they face acting in breach of contract,” Lewis continued. “Those changes ought to be agreed in writing with staff, even if that can only be done by email in view of the short timescale involved.”

“Having staff on 66% of their wages may also not be enough support and it remains to be seen whether or not we will see multiple redundancies during the next few weeks. ”

Criticism of ‘out of touch’ billionaire Chancellor

“Rishi Sunak has served up a dish of support that is too unsubstantial, leaving many workers struggling to put food on the table,” GMB Acting General Secretary John Phillips said.

“In workplaces now forced to close, the imposition of an effective 33% pay cut will leave many without enough to live on and pay the bills, given how low wages were in the first place.”

“For all the promises of levelling up, this billionaire Chancellor will today be pushing many workers effectively below the minimum wage.”

The knock on effect of these measures on local economies could be huge, Phillips adds. “With many dependent businesses in the supply chain escaping this raft of closures but not being eligible for a Job Support Scheme so poor, it is has been widely rebuffed by employers who have unsurprisingly not volunteered to pay 55% of wages for 33% hours.

“This panic measure has not been properly thought through and leaves too many industries and workers left in limbo land and ineligible through no fault of their own.”

More support needed for a second wave

Slightly more generous than the original furlough offering, this update provides a glimmer of hope to businesses facing closure, Rhys Wyborn, employment partner at law firm, Shakespeare Martineau, said.

“With further restrictions on the horizon, today’s announcement appears to be an acceptance by the Government that businesses need further support to survive the second wave.”

After the success of the Eat Out to Help Out scheme, the 10pm curfew has caused serious issues for hospitality businesses, with many facing a difficult future, Wyborn noted.  However, increased support from the Government could allow these businesses to close without worrying whether they’ll be able to open again.

This extra help may be enough to save jobs that could have been lost under harsher restrictions, but the threat of redundancies still looms.

“For businesses on the brink that aren’t forced to close under the new measures, this announcement may not be as welcome.”

Plan too general?

David Fort, managing partner of Haines Watts Manchester, said he was dismayed at the Government’s ongoing “one-size-fits-all” approach.

“I think the Winter Economic Plan announced by the Chancellor a couple of weeks ago was far too general and I think the Government has wasted a significant proportion of £9bn on the furlough bonus scheme, because that’s going to go to businesses that don’t necessarily need it,” he said.

“Whilst this one-size-fits-all measure worked in the spring, I think the Government could be a bit smarter in how they allocate support now.”

“There are some businesses that have flourished in the current situation and have certainly managed to keep going. However, there are also some sectors that have been absolutely decimated and I think the mix is badly skewed.”

Fort said that the Government’s communication needed to be “much clearer”. Initially Sunak was opposed to extending the furlough scheme, but suddenly the goalposts have been moved again. “I think there has been a complete lack of consistency and clarity,” he added.

“Like a lot of businesses, we have put a lot of time and effort and invested money into getting the office and the environment Covid-19 secure. I know a lot of my hospitality clients have done the same. You almost feel as if that has been wasted really. We’re all feeling as if we have been led down a path that we thought was the right way and then suddenly it’s a dead end.”

Fort added that his hospitality clients were all just gearing up to start again after being “actively encouraged” to open up with the Eat Out to Help Out Scheme. He said it was “massively unfair” that the hospitality sector is being blamed.

“They have all come up with clever ways of working – from apps to order at your table, to putting up screens and moving things around to ensure social distancing. A lot of clients have taken the opportunity to revamp their offering and look to how they could operate differently.

Fort explained that if the hospitality sector is an area of focus for the Government, policymakers should be offering additional support to restaurants, bars and nightclubs specifically.

“I have a nightclub client that is very much focused on students and whilst the 10pm curfew was in place, they were just about covering costs, they weren’t making any money, but at least they were able to pay staff and contributing. Further restrictions mean they are just not going to be viable. I also have a live events client and that again is a sector that has been affected. Other clients, particularly those in the home improvements sector are absolutely flying.”

Fort suggested that Government assistance going forward very much needs to be targeted by sector and geographical location. He added that the North of England faces an anxious wait to see the full impact.

“We have mayors and surely with the advice they are getting, they should be the ones who are making the decisions, not a one-size-fits-all approach?”

As unsatisfying as it may be, only time will tell as to whether this extension of the Job Support Scheme will be enough to help employers survive the difficult winter months.

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