COVID-19: Businesses plead for taxpayer aid to be extended set to be rejected

June 14, 2021

Chancellor Rishi Sunak is set to reject calls to bolster taxpayer support for businesses in line with a delay to coronavirus Freedom Day, according to a Treasury source.

PM Boris Johnson is tipped to confirm on Monday evening that the timing for an end to all COVID-19 restrictions will slip beyond the 21 June date originally hoped for - by up to a month.

He will apparently call for "one last heave" in a bid to protect the NHS from the surge in Delta variant cases.

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Shares in lockdown-hit sectors were trading lower on Monday afternoon with Premier Inn owner Whitbread off by 2%, and the Restaurant Group, whose brands include Wagamama, down 4%.

Aviation stocks such as British Airways owner International Airlines Group and engine maker Rolls-Royce were down by more than 4%.

While businesses will understand the government's caution, many are continuing to access and benefit from taxpayer aid including the furlough scheme - support that is due to be wound down from the end of June after an extension announced at the budget in March.

The Treasury source explained: "We went long to cover if we had to delay some reopening, so support is already in place".

The remarks suggest there will be no widespread extensions announced on Monday - but the prospect of targeted support should not be ruled out.

Roger Barker, director of policy at the Institute of Directors, said of the expected lockdown delay: "Clearly this is a blow for many businesses, particularly those in the retail and hospitality sectors.

"We are now approaching a cliff edge, with government support for business ending or beginning to taper off.

"It is vital that this support is pushed out commensurately with the lockdown extension.

"Economic support and public health measures must be aligned."

Mr Barker pointed to a number of significant costs facing businesses around the end of June and start of July, with quarterly rent due, a ban on commercial rent evictions ending, and both furlough support and business rates relief starting to taper off.

In the case of the Job Retention Scheme official figures have shown 3.4 million workers remained on furlough on 30 April - though more recent real-time data suggests this had fallen to about 1.8 million in May.

Employers claiming under the scheme will have to contribute 10% of a monthly salary from July, as things stand, with the taxpayer support falling from 80% to 70%.

The scheme, which has cost £64bn to date, is due to be wound up completely by the end of September.

The business rates holiday enjoyed by hospitality, retail and leisure firms since the start of the pandemic is also among aid due to be scaled back from July.

The delay is of particular frustration to hospitality firms - forced to operate at limited capacity during the busiest months of summer and during a delayed Euro 2020 football championships involving three home nations.

Kate Nicholls, chief executive of trade body UK Hospitality, said thousands of operators will continue to lose money until the last phase of the road map out of lockdown restrictions is implemented.

She said: "Hospitality businesses cannot continue to operate under conditions that leave them unable to trade profitably and so we echo the importance of government support should there be any delay to the complete lifting of restrictions."

She added: "Hospitality has been the hardest hit during the crisis, losing more than £87bn in sales, leaving businesses deeply in debt and at risk of suffering "economic long COVID" if the long term support set out by the chancellor for the sector at the budget is not sustained and adjusted.

"Even now, with partial reopening, sector sales remain down 42% and 300,000 jobs remain protected by furlough."

Theatres are among those desperate for a complete reopening as restrictions limit audience capacity to 50%.

Lord Andrew Lloyd-Webber, who has previously said he is prepared to risk jail if he can not fill theatres from 21 June, told the Daily Mail on Monday that the industry faced "bankruptcy" unless COVID rules were axed.

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