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10 June furlough deadline presents hospitality with difficult call

Published:  09 June, 2020

The 10 June cut-off for entering staff on furlough is presenting some hospitality businesses with a tough decision against an uncertain timetable for a staged reopening of the industry.

To qualify for the new Flexible Furlough scheme, allowing workers to be brought back part time from 1 July, those same staff must have spent at least one three-week period on furlough, meaning the 10 June is the last date that businesses can enter employees into the scheme.

However, and while on-trade businesses and trade bodies including UK Hospitality and the Wine & Spirit Trade Association have broadly welcomed the flexibility that the updated scheme will offer, the 10 July cut off is set against many unknowns, including a lack of clarity from government over several aspects of how and by what increments hospitality can reopen.

This, in turn, could see staff unnecessarily furloughed, or as an alternative, made redundant, as operators have no clear way of assessing what staff requirements will be against how much business will return and over what period as restaurants and bars gradually reopen from 4 July.

Reports on Sunday in leading national newspapers including the FT and The Times, threw further confusion over the uncertain roadmap for reopening, citing sources in Whitehall as saying that a group of senior cabinet ministers were pushing for a reopening date from 22 June.

“The government has not provided a road map for businesses, so how can employers be expected to make a decision tomorrow (Wednesday) on whether to furlough more workers, so that they are eligible for the new Flexible Furlough scheme which starts from 1 July.

“Businesses are faced with a critical decision on whether to furlough more workers tomorrow, but without knowing how the government plans to fully re-open the UK’s economy,” said Nimesh Shah, a partner at accountancy and tax advisory firm Blick Rothenberg.

“Many businesses are still uncertain of the future… in particular, businesses operating in tourism, leisure and hospitality do not have visibility of when they may be able to welcome customers; in the present economic situation, it’s impossible for businesses to project what their needs may look like in the months to come,” he added.

The firm warned that the 10 June decision deadline as to whether to enter workers into the furlough scheme could either leave employers short or force them to consider redundancies.

In response to those reports about an earlier reopening date, Kate Nicholls, chief executive of UK Hospitality, has said that while reopening sooner “would be welcome”, a majority are planning around 1 July, and two weeks earlier would make little difference.

The major concern, with the two-metre rule still in place and footfall also uncertain, is that many restaurants and bars will be unable to operate profitably for quite some time to come, with the issue of rent still unresolved for many financially stressed operators.

As Tony Lorenz, founder of on-trade specialist Lorenz Consulting, warned: “It’s only a few weeks to go to the June Quarter Day, and unless something gives between landlords and tenants or the government steps in again, this period will likely be catastrophic for the hospitality industry, irrespective of the earlier-than-scheduled re-opening.”

“The majority of the hospitality sector, particularly in major cities, will be unable to pay rent demands, as well as reopen and operate (even with a one-metre rule) – an overwhelming majority of Lorenz’s restaurant clients believing it will take until June 2021 (at the earliest) to return to profit.”