Chancellor Rishi Sunak has just announced that the current reduced VAT rate for hospitality and tourism is being extended to the end of March next year. The measure is aimed in supporting over 150,000 businesses and protecting as many as 2 million jobs in jeopardy.
In his statement the Chancellor compared that in the spring the problem was that businesses were closed. In contrast he underlined his view that the problem is now different. He emphasised that businesses are now open but face a fragile future.
He went on to detail a new jobs support scheme enabling businesses to preserve ‘viable’ jobs, the term viable was repeated.
He said his new jobs support scheme will comprise three main features.
Workers will need to do one third of their normal hours and be paid by their employer as normal for those hours. The government and employers will then together cover pay lost.
This will apply to small and medium sized businesses and larger employers will only be covered if their turnover has gone down as a direct consequence of the impact fromCovid-19.
All employers will be entitled to apply including any that have not used the furlough scheme.
The new scheme will start in November and all businesses can use it alongside the existing job retention programme.
There was also new support for the self-employed through a Self-Employment Income Support Scheme extension. The extension will support ’viable’ traders who are facing reduced demand over the winter months, covering 20 per cent of average monthly trading profits via a government grant.
More than one million businesses that have borrowed under the Bounce Back Loan Scheme will be offered the choice of more time and greater flexibility for their repayments. Lenders have been enabled to offer Coronavirus Business Interruption Loan Scheme borrowers more time to make their repayments where needed.
The application deadline for all coronavirus loan schemes – including the future fund – has been extended to 30 November ensuring even more businesses can benefit from government-backed support.
The measures seem to address a number of key economic issues, but do not replace the scope and scale of support provided by the furlough scheme. Any extension of the furlough scheme was not expected, the reaction to the latest measures will we expect be mixed as their is a big gap between the old and the new. The Chancellor’s repetitive use of the term ‘viable’ will be also much used in the analysis of and response to his new measures.
Commenting on today’s announcement by the Chancellor, UKHospitality Chief Executive Kate Nicholls said: “The announcement of further restrictions yesterday was a significant hammer blow that will inevitably depress trading. It was crucial that the Chancellor delivered support today that specifically targeted the hospitality sector which has been hit harder than any.
“The announcement of flexible employee support is a move in the right direction, but hospitality needs more targeted efforts to support jobs. Almost 1 million people in our sector are still on furlough. We need Government to go further in hospitality, recognising the greater restrictions imposed upon us, and pick up the full cost of unworked hours. This would be a relatively low cost for huge reward for our workforce. Full support to sustain people in their jobs during what could be a pretty bleak winter for hospitality would be a great step forward.
“Looking ahead, the extension of the VAT cut was absolutely critical. UKHospitality had pushed hard for it, so it is great to see the Government taking note of our major concerns about recovery into 2021, though this must be extended further. The announcement of longer tax deferrals and the option of longer loan repayments should deliver some much-needed breathing room for employers.
“Things were looking grim for our sector yesterday and we were desperately hoping for some good news. The Chancellor has given us some reason to be positive again, but we urge him to engage with the trade on specific measures to keep people in work. While some of these measures announced today will give businesses a future to shoot for, and hope that they can begin to rebuild, we are still not out of the woods.”
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