Mixed reactions to Chancellor’s employer contribution announcement

By Nikkie Thatcher

- Last updated on GMT

Varied response: some have cautiously welcomed the Chancellor's announcement of furlough scheme contributions
Varied response: some have cautiously welcomed the Chancellor's announcement of furlough scheme contributions

Related tags: coronavirus

Trade bodies have voiced mixed opinions on Chancellor of the Exchequer’s announcement of how much employers will be asked to contribute to the furlough scheme.

From August, employers will be asked to pay national insurance (NI) and pension contributions, Rishi Sunak​ announced at the daily Downing Street press conference (29 May).

Following this, from September, employers will be asked to pay 10% of furlough wages with taxpayers contributing 70% and from October, employers are to pay 20%, with taxpayers covering 60%.

The scheme, which is commonly known as the furlough scheme, was first announced on Friday 20 March and currently means employers can claim​​​ for payments that cover 80% of furloughed employees’ wages, up to a maximum of £2,500 per month.

UKHospitality (UKH) chief executive Kate Nicholls hailed the announcement as a “positive and pragmatic step towards reopening the economy while recognising that this recovery will take time, particularly in hospitality”.

She added: “Giving businesses increased flexibility from the start of July is extremely welcome as hospitality looks to reopen its doors to the public.

“The move, which UKH had been calling for, will allow more people back to work on a part-time basis and help venues ensure safety for customers and staff. Flexibility is going to be crucial if businesses are to open and be economically viable with social distancing measures in place.

“The introduction of employer contributions to the scheme from August will put some businesses under particular strain, but the way it is tapered allows for a gradual adjustment. Further support for the self-employed is also helpful for many in our sector.

“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.”

Forced to survive

She went on to call for a solution on rents and an extension of the grant scheme to help mitigate the impact of a reduced furlough.

Nicholls added: “If we do not, a very difficult spring would become a disastrous summer for hospitality.

“We hope the Government bears in mind that many high street businesses will be reopening in the next couple of weeks, whereas hospitality will be forced to survive for an additional month, at the very least, on this reduced form of furlough.”

British Beer & Pub Association chief executive Emma McClarkin was cautiously optimistic about the announcement.

She said: “While we welcome the tapered furlough support and increased flexibility announced today (29 May), all pubs have to be open and operating viably by July for this scheme to work. Pubs have been closed since March with no income coming in. Expecting them to contribute to furlough costs if they are closed or operationally unviable is simply not feasible.

“We continue to work closely with the Government to ensure all UK pubs can open as soon as possible. Preventing pubs from reopening as the furlough support reduces means those pubs will have no income to cover the additional staff costs – risking job losses and pubs staying closed for good.”

McClarkin also stated the importance of the Government considering reducing the two-metre social distancing rule to one metre.

She added: “Under the current two-metre social distancing rules, two thirds of our pubs will remain closed. To open pubs up safely, as soon as possible, it is imperative the Government explores the World Health Organisation’s suggested one-metre rule for social distancing and allows pubs to reopen under those safe conditions in July. This will allow three quarters of our pubs to reopen and more staff to return to work – ensuring the tapered furlough scheme protects pub jobs as they reopen.

“We also call on the Government to recognise that up to a quarter of our pubs may not be able to open even with a one-metre rule in place, in which case they will need the furlough scheme to continue at the current 80% until they can reopen.”

The lockdown has highlighted the importance of local pubs to communities and in tackling loneliness and social isolation, according to Campaign for Real Ale (CAMRA) chief executive Tom Stainer.

Harsh reality

He said: “It is vital we give pubs the support they need to be able to survive and thrive in the months and years ahead. 

“The introduction of flexibility in the furlough scheme that will allow people to work part time is welcome news for pubs and their staff. However, the harsh reality of this announcement is that many pubs just won’t be able to pay towards wages, NI and pension contributions on top of existing costs and during periods of reduced trade due to social distancing measures reducing capacity.”

However, smaller pubs that are unsuitable for social distancing, as well as those in Northern Ireland, Scotland and Wales that might not be able to reopen until much later in the year won’t have any income at all to pay these extra staff costs, Stainer said.

He added: “This will leave pubs with an impossible choice between taking on more debt, letting staff go, or calling it a day and closing down their businesses for good. 

“The Government should look again at this announcement and consider applying a flexible furlough arrangement for pubs until later in the year, helping them survive restricted reopenings. Otherwise, I fear we will see many jobs lost and pubs not being able to survive and having to close for good.”

The Wine & Spirits Trade Association welcomed the Chancellor's announcement and its introduction of much-needed flexibility sooner to the furlough scheme.

Chief executive Miles Beale added: “He has been listening and we are grateful. The scheme has been a lifeline for wine and spirit businesses – especially those who predominantly supply pubs, bars and restaurants – and flexibility is something we and our members have requested.

“The scheme has so far been generous and the plan to phase in employer contributions is fair – provided that pubs, bars and restaurants are able to open and operate viably. Unless, and until, all hospitality businesses are permitted to operate at full capacity, the Government should hold open the prospect of additional support to offset any restrictions it needs to impose for public health reasons.

“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.

“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.”

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