Sunak’s new plan is not enough, say employers
Chancellor’s proposed schemes to help struggling companies are ‘too little, too late’, claim bosses
HUNDREDS of thousands of jobs are still at risk as Rishi Sunak’s new grants to businesses closed by local lockdowns and their staff are “not enough”, employers have warned.
The extra furlough scheme and handouts to companies are too little for those ordered to shut their doors, and do nothing for those whose incomes have been flattened by the curfew and other restrictions, firms said.
The new measures will see the Government pay two thirds of employees’ salaries, up to a maximum of £2,100 a month, but will only apply to businesses ordered to close completely for at least seven days. Companies will not have to top up wages, but will be expected to pay national insurance and pension contributions. Firms in local lockdowns will also be able to claim grants of £3,000 a month as part of the new scheme, which will run for six months, with a review in January.
“It is right that the Chancellor has responded to our long-standing calls for more local support. More generous cash grants will be of some help, but for most this will not be enough to offset a sustained cash crunch,” said Adam Marshall at the British Chambers of Commerce. “Additional local restrictions and lockdowns will have a material impact on many other firms, especially in supply chains and in town and city centres.”
The hospitality industry, in particular, is still struggling, with tighter restrictions on customer numbers, visitor hours and, in Scotland, a ban on serving alcohol indoors.
Michael Kill, chief executive of the Night Time Industries Association, said the measures were “too little, too late”. “There have been segments of our industry that have been locked down for nearly eight months and haven’t had the Chancellor’s focus to support them, apart from the furlough scheme,” he said. “We are now at a point at the end of October that this is going to culminate in potentially half-a-million jobs going. It feels a bit too little, too late.”
Kate Nicholls, chief executive of Ukhospitality, said: “If the Government is really serious about avoiding mass redundancies in hospitality, then it needs to do something about the curfew in other parts of the country where infection is lower.”
It came as nightclub operator G-A-Y fired the starting gun on legal action against the Government over the restrictions. Jeremy Joseph, owner of the nightclub group, threatened this week that he would pursue a judicial review of the curfew if the restriction was not dropped, arguing that the 10pm curfew made “absolutely no sense” and did “the opposite of protecting people”.
In a letter to the Health Secretary, Mr Joseph said he had requested a “satisfactory response” by 4pm on Tuesday.
However, the Government has asked for 14 days to respond, prompting Mr Joseph to launch a judicial review.
The impact of the pandemic on the hospitality sector was laid bare by data showing the UK has nearly 25,000 fewer licensed premises open since before the lockdown. Findings published by CGA and Alixpartners showed just over 90,000 sites across the UK had reopened by the end of September, compared with 115,000 in March.
Dame Carolyn Fairbairn, director general of the Confederation of British Industry, said a more consistent, evidence-based policy would help.
“We’re mindful the rising infection rate risks a new national lockdown, that additional measures are necessary,” she said. “That said, we do want to see evidence published around restrictions.”
Roger Barker, at the Institute of Directors, welcomed the measures, but said much more was needed to protect jobs and to create new ones. He urged ministers to “get on the front foot where possible” by cutting employer national insurance costs and offering tax reliefs to encourage new jobs.
We were hoping for a V: a rapid economic bounceback. We would have probably settled for a W; a wobbly recovery, with dips along the way. Right now, even an L – a steep plunge that at least bottoms out – would be acceptable. Instead, it is starting to look more like an I: a collapse that just goes down and down.
And it may even turn out not to be a letter that best describes the economy at all, but something more like a deranged scribble from a psychopath.
With deeply disappointing GDP figures published yesterday, and with local restrictions already covering a third of the country, output is weakening and the Chancellor has been forced to start putting in place plans to support businesses through Lockdown 2.0.
There is a problem, however. We have already been through a series of rescues, at vast expense, none of which has done any more than postpone the pain. Even worse, instead of a proper plan to get us through to the end of the epidemic, the Treasury is still muddling through with half-baked, badly designed rescue schemes. That has to change, and change fast, if the British economy is to have any hope of coming through the crisis intact.
Friday was a grim day for the British economy. GDP expanded by a modest 2.1pc in August, which might sound OK in normal times, but was far less than expected given that we were meant to be reopening after lockdown.
We would have hoped to see at least double that if the economy was genuinely recovering. Even worse, we are heading into another lockdown.
Economists at Bank of America calculate that regions with Covid cases above 100 per 100,000 people, and therefore at high risk, account for a third of GDP. Add in London, where cases are rising again, and another 23pc of GDP is under threat.
Unless something changes very quickly, it looks inevitable that the next quarterly statistics will show GDP falling again.
The winding down of the furlough scheme in just 20 days’ time could hardly have come at a worse moment.
The Chancellor has already been through a couple of replacements. There was the Job Retention Bonus, which offered employers an extra £1,000 for keeping furloughed staff on
until January (a complete waste of time, as either they were worth keeping or not but a grand isn’t going to change that calculation either way).
It was followed by the Job Retention Scheme, which paid a far smaller percentage of wages, and offered little prospect of saving any employees (if someone can’t work because there are no customers it doesn’t make any difference if the Treasury pays a slice of the salary).
Now we have a third attempt: a revamped furlough, but with support only for companies that are forced to close because of government restrictions, along with a cash grant to help them through. That is at least something. But it is hard to imagine many pubs, restaurants, shops or nightclubs are going to keep going through a dismal winter, and a terrible Christmas, just because they can furlough a few staff or because the Treasury is handing over a few thousand. Many are going to throw in the towel, and it is hard to blame them.
In truth, instead of yet another
hastily cobbled together rescue package, what the Government needs is a clear strategy for steering us through this mess. That should have three key elements.
First, the economy will have to learn to live with the virus until we get a vaccine or else we achieve some form of population immunity. This isn’t a temporary emergency anymore.
Sure, it was easy to understand why the Chancellor came up with lots of schemes scribbled on the back of an envelope in April. He had five minutes to come up with something. That is not true this time around. The Treasury has had six months to think about the possibility of a second wave, and a return to lockdown. It has to decide which parts of the economy need saving, and how much it is worth spending on the rescues, and what it is prepared to abandon. And it needs to start making that clear now.
Next, let creative destruction rip. Covid-19 has accelerated trends that were already under way. Sales were moving online, but we have fastforwarded that by a decade.
Working from home was on the rise already, but has suddenly become normal. Traditional retailing was already in steep decline, and we had too many pubs and restaurants.
There is no point in keeping businesses alive through the epidemic if they were simply going to collapse in 2023 or 2024 anyway. It might sound harsh, but they may as well close now. All that office, retail and hospitality
space can be turned into something more useful, and the staff can find jobs in industries that are growing.
Finally, offer plenty of support to workers. Whether unemployment climbs to two or three million over the winter remains to be seen. But it is going to be a horrifically big number.
There isn’t any point in keeping low-skilled, relatively poorly paid hospitality and retail staff on furlough
‘There is no point in keeping businesses alive if they were simply going to collapse in 2023 or 2024 anyway’
until the spring. It is far better for them to be made redundant. But, in return, we should be far more generous to anyone who loses their job.
The best thing we could do right now is revamp Mrs Thatcher’s Enterprise Allowance Scheme from the last big surge in unemployment in the early Eighties. It is far better to pay people to start their own business than to sit around doing nothing, or remain “furloughed” by a company that doesn’t plan to rehire them anyway.
We are seven months into the Covid-19 crisis. Our economy looks set to end up 10pc smaller, at least, and we will have added hundreds of billions to the national debt. We know that Lockdown 1.0 didn’t achieve much. We can’t afford to make the same mistakes with Lockdown 2.0.