Covid-hit industries will need extra £50m after furlough ends, says Labour

Covid social distance

The industries most affected by the UK’s delayed reopening will need to find almost £50m to cover wages once the government’s furlough scheme is cut back on 1 July, according to analysis by the Labour party.

Hospitality firms and cultural and arts businesses, which still have large numbers of workers on furlough, will need to cover the higher cost of keeping workers on the scheme even though they have no choice but to limit the number of customers they serve over the next month or are forced to remain shut.

Labour said the figures, which are based on official data, showed that the chancellor, Rishi Sunak, should delay the tapering of the furlough scheme until the government could safely lift restrictions on gatherings and social distancing.

Nightclub owners and events organisers have complained that they could be forced out of business by the cuts in subsidy, despite making huge efforts over the past 16 months to save money while their operations were mothballed.

Earlier this month the Night Time Industries Association (NTIA) backed a letter written by Manchester’s night-time economy adviser, Sacha Lord, to Boris Johnson that said the four-week extension of the Covid-19 “roadmap” should be matched by an extension of government support.

In a letter that threatened the government with legal action unless it extended support until at least the next milestone on 19 July, Lord said the hospitality sector expected to lose £3bn in total over the course of the four-week delay, following an £87bn loss over the past year.

According to the NTIA, 54% of businesses had ordered extra stock, 73% had called in staff, many of them from the furlough scheme, and 60% had sold tickets for events.

The shadow business secretary, Ed Miliband, said: “A month’s delay may seem like a short time, but for businesses legally closed from trading or those hanging on by their fingertips from going under and relying on the summer season, the delay is another blow.

“That businesses unable to reopen are being sent huge bills defies logic. Unless ministers take action, we risk pushing more firms over the edge.”

He said businesses had “done right by our country” during this crisis, but ministers had “repeatedly failed to grasp the simple principle that public health restrictions must be matched by fair economic measures”.

On 1 July the level of subsidy offered by the government to retain workers on employer payrolls will fall from 90% to 80%. But to qualify for the scheme, employers must maintain pay at 90% of a workers’s salary up to a cap of £2,500 a month.

Labour said the hospitality industry had 14% of its workforce on furlough, accounting for 269,477 people, while the arts, entertainment and recreation sectors had 21% of workers on furlough, or 115,734 people.

Employers in the hospitality industry will need to find £33m to top up pay while the arts, entertainment and recreation sectors will need a little over £14m to continue qualifying for the furlough scheme.

On 1 July, the government is also due to begin withdrawing the 100% business rates relief for retail, hospitality and leisure businesses.

Labour said: “That means businesses will have to contribute 34% towards their monthly business rates irrespective of their trading status. The average night club will have to pay £718 in July, the average bar will have to pay £500, the average restaurant will have to pay £598, and the average theatre will have to pay £1,048.”