Industry reactions to the Chancellor’s Winter Recovery Plan

Chancellor Rishi Sunak announced a new job support scheme and extended the coronavirus business loan scheme as part of his Winter Recovery Plan.

In a bid to help businesses with cash flow, Bounce Back Loans can now be extended from six to ten years, and businesses that are struggling can choose to make interest-only payments, or suspend repayments for up to 6 months.

In response to the government’s measures, David Wells, Chief Executive of Logistics UK, commented: “Logistics UK warned government that urgent action was needed to protect struggling businesses to avoid an avalanche of redundancies and insolvencies; we are pleased the Chancellor has listened to our fears and offered a platform for economic growth and recovery.

“With the UK remaining in crisis mode as coronavirus cases rise, ongoing, flexible financial support for businesses will be essential until the economy recovers. We are pleased to see the targeting of hospitality, tourism and small and medium sized companies, all of whom have been hit particularly hard by the COVID-19 containment measures. We also support the measures to assist businesses with cashflow issues with more generous loan terms and VAT deferrals.”

Sunak confirmed that for the hospitality sector VAT rates remain at 5% until 31 March 2021. Despite this, concern was raised that the level of support was not enough to help the food and drink sector, which could have a major impact on food manufacturers.

Food and Drink Federation (FDF) Chief Executive, Ian Wright CBE, said: “The decision to introduce the Jobs Support Scheme and to extend the VAT cut for hospitality are welcome from the government but simply do not go far enough. The requirement for staff to be working part-time to be eligible for support will not be enough to sustain hospitality businesses and their food and drink manufacturing suppliers – the squeezed middle - through a difficult autumn and winter where pubs, bars, and restaurants will have significantly reduced custom.

“The pandemic has had a far greater impact on some sectors of the economy than others – sectors that would continue to support millions of viable jobs once a vaccine is achieved and social distancing can end. Only by continuing a targeted furlough scheme while the current restrictions remain will we avoid mass long-term unemployment and the decimation of a sector that could otherwise support our economic recovery once the pandemic is over. We urge the UK Government to engage with those industries most impacted about what more can be done to support those food and drink businesses most affected by the restrictions.”

The Job Support Scheme aims to protect jobs, but there are concerns that workers at companies forced to close because of coronavirus restrictions – where no working hours are available – will be left without support.

Summary of the Job Support Scheme

Under the Government’s Job Support Scheme, employers are being encouraged to retain staff even if there is not enough work for them. Employers will continue to pay the usual wages of their staff for the hours they work. For hours not worked, the government and the employer will each pay one third of the equivalent salary.

In a step designed to encourage companies to retain staff, the employee must not be on a redundancy notice.

The scheme will be open to all employers with a UK bank account and part of PAYE. All small and medium-sized enterprises (SMEs) will be eligible. However, large businesses must show their business has been adversely affected by Covid-19. Big companies will need to show that turnover has fallen by a third.

The government said it also expected that large employers would not pay dividends to shareholders while using the scheme.

The short time working subsidies are designed to sit alongside the government’s jobs retention bonus. Under this scheme, announced earlier this summer, businesses receive a one-off payment of £1,000 for every previously furloughed employee they still employ at the end of January 2021.