To say the last couple of years has been testing for businesses is an understatement.
During lockdowns and tiered restrictions, businesses in many sectors have been unable to trade as normal. Businesses have had to close high street units, and hospitality companies had to switch to delivery and takeaway services. While there has been significant government support throughout the pandemic, many of these initiatives are shortly coming to a close and are being tapered off.
As we’ve come out of lockdown, pre-covid trading levels have returned, but businesses have been hit with staff shortages and an increase in wages to help fill this void.
Worryingly, the new Plan B covid restrictions, which have recently been introduced, are likely already affecting the hospitality industry at their busiest time of the year. Typically increased trading during the Christmas and new year period gives these businesses a cash buffer to tide themselves over the quieter months at the start of the year.
It will be incredibly frustrating for high street and hospitality businesses to miss out on enhanced seasonal trading two years in a row, and the government should consider offering sector-specific support. However, in the interim, they should seek out funding solutions to help support them during this particularly tricky period.
Plan B restrictions include guidance for employees to work from home and the compulsory wearing of face masks in shops and on public transport.
Additionally, Covid passes on the NHS are compulsory for nightclubs and other large venues, including unseated indoor venues with 500 or more and unseated outdoor events with 4,000 or more people.
These measures are set to be reviewed on January 5 and will expire on January 26 if the government believes they are no longer necessary.
While not all of these measures have been introduced at the time of writing, people are already starting to work from home and cut back on socialising.
On Thursday 9 December, it was reported that schools had already cancelled pantomime visits, alongside universities switching back to remote teaching. and Passenger numbers on London Underground and rail stations around the country have dropped about 20%.
Similarly, data from the aviation industry shows that flight bookings in the week to 5 December were 75% down, a fall of 48% from the two weeks before. Visit Britain estimates that this will lead to an initial loss of £280m from inbound tourism spending in the UK.
Tim Martin, the founder of Wetherspoons, has been particularly vocal about the incoming restrictions, calling them “lockdown by stealth” and expressing concern that the measures will wipe out the company’s first half-year profits.
Businesses providing ancillary services to office workers, such as coffee shops, dry cleaners and sandwich bars are also likely to be suffering as city centres hollow out.
While the government puts the safety and well-being of people and the NHS first, it’s clear that new support measures will need to be introduced to help businesses deal with disruption and a drop in trading. Policymakers cannot be complacent and must act with speed as its estimated that the new restrictions will cost the economy up to £4bn a month.
Nicola Sturgeon has already committed £100m to support hospitality businesses, and it would be encouraging if the UK government were to do similar.
Furlough came to an end in November, and the VAT cut for hospitality businesses was increased from 5% to 12.5% and is due to expire on 31 March 2022. Furlough was a great success, and policymakers should seek to reintroduce it for affected sectors and revert back to the VAT cut of 5%.
The Government’s Recovery Loan Scheme (RLS) was extended at the Autumn budget for six months to 30 June 2022.
However, from 1 January, the scheme will have more restrictive measures, including the government guarantee being reduced from 80% to 70%.
Under the new restrictions, businesses cannot wait this long, so it's sensible to apply for RLS and general financing options at the same time. There are an array of different products on the market, including invoice finance, asset finance and revolving credit facilities, so it's worth taking the time for businesses to pick the option most suitable to them or engage with their accountants who can better advise them.