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Prime Minister’s announcement is a hammer blow for hospitality retail and leisure sectors

The Prime Minister’s announcement will be a hammer blow for many businesses, particularly those in the hospitality, retail and leisure sectors.

The Prime Minister’s announcement that people should work from home and stay out of town centres will be a hammer blow for many businesses, particularly those in the hospitality, retail and leisure sectors, says Milan Pandya.

Encouraging people to work from home and stay out of the town centres will be a final hammer blow rendering many businesses unviable. For them working from home is simply not an option.

Following the Government’s announcement of further restrictions, including the revised message that those who can do so should work from home and may need to do so for a period of at least six months, it is imperative that the support measures introduced by the Chancellor are also extended, otherwise businesses will suffer and unemployment will rise.

The previous basket of measures introduced at the start of the pandemic are being phased out in the coming months which was when the Government thought normality would return. The resurgence of the virus has forced the Government to act and revise these plans by at least six-months, so the Chancellor’s plans need to be revised as well.

The broad measures originally available to all businesses to aid cashflow included the deferral of tax liabilities and access to funding which was 80% guaranteed by Government through the Coronavirus Business Interruption Loan Scheme lending platform. These lending schemes need to be extended as businesses now revise their forecasts to take into account the impact of the latest restriction measures with perhaps a stricter lockdown in the coming weeks.

Additionally, for those businesses that have secured lending, the profile of repayment should be amended to provide a greater than 12-month initial repayment holiday and extend the repayment terms to 10 or 15 years to allow the cashflow to be affordable.

Measures that allowed deferral of tax liabilities in the form of the VAT deferral and personal income tax deferral will mean that these liabilities are required to be paid in quarter one of 2021. An instant and easy measure for Government to introduce and provide some comfort for businesses struggling with cashflow would be to defer these repayments further to at least the summer of 2021. This does not cost the Government any further cash sums but simply provides time for businesses to repay. If these businesses fail now, then all the previous measures utilised by them would be in vain.

The Government will therefore need to either extend the Furlough Scheme on a sector specific basis or bring in alternative measures to protect employment in these businesses – as the German and French Governments have done – in the medium-term. The alternative will undoubtedly be mass unemployment, which will particularly hit 16-24-year olds and potentially risk a lost generation.

The Government also needs to extend the existing measures to protect businesses from facing insolvency proceedings.

A joined-up and medium-term approach to supporting business and livelihoods is essential to avoid the health crisis also becoming a long-term economic crisis.

Would you like to know more?

If you would like to discuss any of the above guidance, please contact Milan Pandya or your usual Blick Rothenberg contact.

For any press queries, please contact David Barzilay whose details are to the right.

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