UK chancellor confirms furlough replacement and 'pay as you grow' plans

The UK’s chancellor of the exchequer, Rishi Sunak, has unveiled new support measures for UK businesses. The ‘winter economy plan’ will see the British government and businesses top up workers’ wages covering up to two-thirds of their normal hours for the six months from November, the chancellor told the House of Commons on 24 September. The new Jobs Support Scheme will replace the furlough scheme when it ends on 31 October. There had been fears of impending mass redundancies. The chancellor said employees would have to work for at least a third of their normal hours to quality for the new scheme. “The jobs support scheme is built on three principles,” the chancellor said. “First, it will support viable jobs. To make sure of that employees must work at least a third of their normal hours and be paid for that work as normal by their employer. The government, together with employers, will then increase those people’s wages covering two-thirds of the pay they have lost by reducing their working hours, and the employee will keep their job. “Second, we will target support at firms who need it the most. All small and medium-sized businesses are eligible but larger businesses only when their turnover has fallen through the crisis. “Third, it will be open to employers across the United Kingdom, even if they have not previously used the furlough scheme. In a further measure, UK businesses which have borrowed money via the Coronavirus Business Interruption Loan Scheme (CBILS) will be given more time to repay the money. In news most relevant to some corners of the events industry, the chancellor confirmed the VAT cut for hospitality and tourism companies, from 20% to 5%, will be extended until March 2021. The chancellor also confirmed a new “pay as you grow” scheme, which offers businesses which took out a bounce-back loan more time for repayment. Firms can now make interest-only payments and heir credit rating would not be impacted. “Loans can now be extended from six to 10 years, nearly halving the average monthly repayment,” he said. Clive Wratten, CEO of the Business Travel Association, commented on the announcement: “We welcome the chancellor’s ongoing support through the measures announced today. The Job Support Scheme will help temper the level of redundancies in our sector, but, it will still place a huge financial strain on businesses currently seeing a catastrophic drop in demand. “It will not kickstart business travel, a vital enabler of the British economy. This requires urgent action on quick testing at departure. Only this will ease the burden on an industry ravaged by Covid-19.” Lex Butler, chair of UK hotel booking association, HBAA, added: “Speaking on behalf of the 700K people that currently work or have worked in the UK events, accommodation and meetings industry, the chancellor’s new measures are not enough to provide what all the agencies, venues and event services suppliers and their staff desperately needed to prevent some of them from closing or making thousands more staff redundant. “Ahead of reviewing the specific details, we cautiously welcome the new Jobs Support Scheme, the plan for the government to top up wages of workers covering up to two-thirds of their hours for next six months, deferred and interest free loan and tax repayments, and keeping VAT on hospitality and tourism to 5%  until the end of March; and it’s good to see that that the self-employed have not been forgotten. “But since this week’s announced ‘pause’ on larger events being able to take place in the UK, there are too many businesses in our sector facing the prospect of no income or pipeline until well into 2021; they certainly can’t afford to take out loans, or keep staff on even for the reduced hours under the new scheme. Ultimately this is too little to pull them back from the brink and to keep them going, and HBAA will continue lobbying and campaigning for greater financial support. “Despite today’s intervention by the government, there will be further devastation of the sector, not only now but potentially for many years to come as so much talent is being lost from the industry.”