Thursday 22 October 2020 12:20 pm

Rishi Sunak extends support to businesses facing Tier 2 restrictions

The government has expanded its job support scheme for businesses facing Tier 2 restrictions, with Rishi Sunak announcing that the government will pay significantly more of companies’ wage bills under the new post-furlough scheme.

Businesses will only need to pay five per cent of workers’ unworked hours under the new part-time Jobs Support Scheme instead of 33 per cent as before. 

Workers will also only have to work 20 per cent of their normal hours to be eligible for the scheme and not 33 per cent as before.

This means that if someone is being paid £587 for their unworked hours, then the government would be contributing £543 and their employer only £44.

Businesses in the hospitality, accommodation and leisure sector will also get £2,100 for each month they are under Tier 2 or Tier 3 Covid restrictions, even if they are not closed, and they will be retrospective back to August.

The cost of the interventions is expected to cost the Treasury more than £10bn, but the final figure will depend on the take-up of the Job Support Scheme.

Before the Open newsletter: Start your day with the City View podcast and key market data

It marks a large turnaround for Sunak, who told MPs he makes “no apology to responding to changing circumstances”.

Sunak said he met with business groups and unions this morning to discuss the plans.

“The impact of the health restrictions on their businesses is worst than they hoped – they recognise the importance of controlling the spread of the virus, but a significant fall in consumer demand is causing profound economic harm to their industry,” he said.

“It is clear that open, but struggling businesses, require further support.”

The chancellor also announced that profits covered by the government’s self-employed grants will double from 20 to 40 per cent, making the maximum grant increase from £1,875 to £3,750.

Job saver

“I’ve always said that we must be ready to adapt our financial support as the situation evolves, and that is what we are doing today,” Sunak said.

“These changes mean that our support will reach many more people and protect many more jobs.”

Businesses in Tier 3 areas – such as Liverpool, Manchester and Sheffield – that are forced to close will be able to use the furlough scheme to pay their workers’ 67 per cent of wages.

However, Tier 2 businesses up until now did not have any further support, despite restrictions meaning many businesses could only operate at a fraction of their full capacity.

A group of London Tory MPs urged Sunak last week to reconsider this and provide more support to the capital’s businesses when they were plunged into Tier 2 on Thursday.

Kate Nicholls, chief of lobby group UKHospitality, said the chancellor’s announcement today “saved hundreds of thousands of jobs in hospitality and supply chain”.

“[The statement means] crucially securing help for our teams but also giving business a lifeline to remain viable through continued trading where possible and a quicker and easier return to growth as restrictions ease,” she said.

Sticking plaster solution?

Shadow business secretary Ed Miliband said: “The chancellor has been forced to move and patch up his own plan but thousands of jobs have been lost.

Today still not equal to scale of the challenge for shut-down businesses, the self-employed, and supply chain. The country needs an economic strategy and he hasn’t provided one.”

London mayor Sadiq Khan said the changes should have been part of the scheme from the start.

“Instead businesses and workers have been put through weeks of uncertainty.

“The collapse of tourism into London has impacted heavily on footfall and left many hospitality, retail and leisure businesses without any prospect of returning to normal levels of business for many months to come.