Sunak offers backdated support to hospitality and leisure sector

Hospitality, accommodation and leisure firms will be able to claim retrospective grants under new plans announced by the Chancellor.

Businesses in the hard-hit sector can claim grants of up to £2,100 a month backdated to August for areas already subject to restrictions in high-alert level areas.

The Treasury said grants would be available to 150,000 businesses in England that have not been legally required to close but have still been adversely affected.

“I make no apology for responding to changing circumstances,” Rishi Sunak told MPs.

“Let me speak first to the people of Liverpool, Lancashire, South Yorkshire and Greater Manchester and indeed other areas moving into or already living under heightened health restrictions.

“I understand your frustration, people need to know this is not forever. These are temporary restrictions to help control the spread of the virus.

“There are difficult days and weeks ahead, but we will get through this together. People are not on their own. We have an economic plan that will protect the jobs and livelihoods of the British people wherever they live and whatever their situation.”

More help for the hospitality industry came as new figures warned that almost a fifth of hotels and restaurants are on the brink of collapse.

Just under 30pc of all UK businesses are at moderate or severe risk of insolvency with 17pc of accommodation and food services firms deemed in the most under threat category, according to the Office for National Statistics (ONS).

Its faster economic indicators also revealed the hard-hit sector has the highest percentage of firms with no cash reserves at 7pc, piling on the pressure ahead of a bleak winter where many could temporarily close under new local restrictions.

A quarter of the sector’s workers remain on partial or full furlough leave, second only to the arts and entertainment sector, the ONS said.

Anneliese Dodds, the shadow chancellor, described Mr Sunak’s response as a “patchwork of poor ideas”.

The Government’s job support scheme, which comes into effect on Nov 1, was originally intended to require employers to pay a third of workers’ wages for hours not worked, and employees to work a minimum of a third of their normal hours.

Employers’ contribution will now be reduced to 5pc and the minimum working requirement to 20pc, or one day a week (see illustration below).

The Resolution Foundation said the announcement would encourage firms to cut workers’ hours rather than jobs. By its analysis, the monthly cost of retaining two staff on £17,000 a year each for half their normal hours was only £100 a month higher than keeping one on full-time.

“The priority now is for economic policy to get back on the front foot, ensuring we can protect incomes and control the virus in the months ahead,” said Torsten Bell, the think-tank’s chief executive.

“That means scrapping plans to reduce benefits by £1,000 for six million households next April and ensuring those needing to self-isolate are financially able to do so with extended sick pay.”

The Chancellor said the plan would mean “jobs will be protected” as he also outlined a boost for the self-employed.

He raised the threshold for the self-employed’s qualifying profits from 20p to 40pc so that the maximum grant will rise from £1,875 to £3,750.

This is expected to add £3.1bn of support for self-employed workers from November to January, with a further grant to be announced for the February to April period, the Treasury said.

Frances O’Grady, general secretary of the Trades Union Congress, said: “The Chancellor should have increased support for all workers to at least 80pc. And we still need decent sick pay for people forced to self-isolate. No-one should be pushed into hardship this winter.”

However, Thomas Pope, senior economist at the Institute for Government think tank, said the main risk of the new scheme was that “it will spend taxpayer money supporting jobs that do not have a long-term future in sectors that are relatively unaffected by restrictions”.

Some 89 council areas in England have now been put under high-level restrictions areas and a further 34 are under “very high” restrictions, according to analysis by Altus Group.

The real estate adviser said tier 2 measures would harm almost a third of English pubs and almost half of English restaurants, while 4,906 pubs in tier 3 areas in the Liverpool city region, Lancashire, Greater Manchester and South Yorkshire had been forced to close unless they could also serve meals.

A further 2,687 pubs and restaurants will be able to stay open but have not been able to access the Government’s job support scheme and local restriction support grant scheme because their closures had not been ordered, Altus said.

Separate figures from the Treasury showed businesses have borrowed about £4.6bn in Covid-19 support loans in the last month.

Some 6,509 companies borrowed £1.7bn under the coronavirus business interruption loan scheme between Sept 20 and Oct 18.

Meanwhile, 75,380 companies have borrowed £2.2bn as part of the Bounce Back loan scheme and 57 companies have borrowed about £730m from the coronavirus large business interruption loan scheme.

Martin Beck, of Oxford Economics, said Mr Sunak may have to do more to avert a spike in unemployment “given a stuttering recovery and the risk of more Covid restrictions” and because some firms affected by social distancing may be unable to offer workers even a fifth of their normal hours, even if the risk of mass job losses in “social consumption” sectors had been reduced.