Industry gives cautious welcome to furlough scheme changes

By Mathew Lyons

Published: 01 June, 2020

The UK drinks trade has welcomed the extension of the government’s furlough scheme for UK workers during the corovirus crisis – but with concerns for the future.

Changes to the scheme, announced by Chancellor Rishi Sunak on Friday, include workers being able to work part-time from the beginning of July, with their salaries being wholly paid by their employers. From August, employers will have to begin paying National Insurance and pension contributions again, followed by 10% of employee’s pay from September, then 20% in October. The scheme will end on October 31.

Responding to the announcement, Miles Beale, chief executive of the WSTA, called for more flexibility for the on-trade while social distancing and other restrictions remain in place.

“The plan to phase in employer contributions is fair – provided that pubs, bars and restaurants are able to open and operate viably,” he said.

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

Beale also warned that without greater support from the government, many small suppliers in the sector could go to the wall.

“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,” he said.

“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.”

Kate Nicholls, chief executive of UKHospitality, praised the flexibility of the Chancellor’s “positive and pragmatic” approach. But she called for government action on rents, warning of pressure on businesses as furlough support begins to taper off.

“The introduction of employer contributions to the scheme from August will put some businesses under particular strain,” she said.

“The government still needs to recognise that these costs will be difficult for hospitality businesses to bear, and consider other measures to support the sector. This must include brokering a solution on rents, with Treasury contributions if necessary, and considering further grants to support businesses to reopen.

“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.”

The reliance of businesses on government support during the crisis will present problems across the UK economy as the furlough scheme unwinds.

“A recent Know Your Money survey showed that half of UK businesses have employees on furlough – the fact the government is reducing its support through the scheme will significantly increase the financial burdens on millions of companies,” Nic Redfern, finance director at knowyourmoney.co.uk, said.

“Businesses will need to assess their finances carefully and explore other support available to them if they are to ensure they are adequately prepared.”

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