Rishi Sunak announces more aid for Covid-hit businesses – but will it win over workers?

Extra financial support offered to the UK’s hospitality and leisure sectors in particular

Rishi Sunak unveiled a new support package for businesses affected by Tier 2 coronavirus restrictions on Thursday, which affects places like London and Birmingham. AFP

Britain’s Finance Minister Rishi Sunak unveiled three extra financial support measures for businesses affected by the Covid-19 pandemic on Thursday, with a particular focus on supporting the country’s hospitality and leisure sectors.

In the House of Commons, Mr Sunak said cash grants of up to £2,100 ($2,758) a month will be given to companies in tier-two areas, mostly in the hospitality and leisure sectors, where they are open but restricted on how they operate.

He also pledged more support to cover the wages of employees in affected areas and an extra boost for the self-employed.

"This morning, I met with business and union representatives, including those from the hospitality industry, to discuss the new restrictions. Their message was clear: the impact of the health restrictions on their businesses is worse than they hoped," he said.

"They recognise the importance of the tiered restrictions in controlling the spread of the virus. But a significant fall in consumer demand is causing profound economic harm to their industry."

This is the third economic package Mr Sunak has unveiled since the start of September and marks a turnaround for the finance minister after he long resisted calls to extend government support schemes. Opponents have said it was obvious that more help was needed, with an official survey published on Thursday showing more than a third of hospitality companies are at risk of going bust.

Businesses in tier two areas previously complained they would be better off under tier three restrictions, where more support was offered.

Under the new measures, open businesses experiencing considerable difficulty will be given extra help to keep staff on with the government increasing its contribution to wage costs. Businesses will now have to pay 5 per cent of the cost of wages for unworked hours, compared with 33 per cent previously.

Separately, the 150,000 hotels, restaurants and B&Bs in affected areas of England will be eligible for cash grants of £2,100 a month with companies affected by local lockdowns since the summer able to backdate grants to August. The devolved nations of Wales, Scotland and Northern Ireland will receive the equivalent funding.

"That’s equivalent to 70 per cent of the value of the grants available for closed businesses in tier three," Mr Sunak said.

The self-employed will also have grants doubled from 20 per cent to 40 per cent of their previous incomes, with a maximum grant available of £3,750. To date, the government has provided over £13bn of support to self-employed people.

Adam Marshall, director general of the British Chambers of Commerce, said the true test of these reforms will be whether they help businesses get through the difficult months ahead.

“Backdated grants for hospitality firms in tier two and enhanced grants for the self-employed will go some way to alleviating pressure on many of those who have been particularly vulnerable to the economic impact of the pandemic,” said Mr Marshall.

Britain's public sector borrowing surged to £36.1 billion in September, £28.4bn more than a year earlier, as the government's heavy spending to prop up the economy continued amid the Covid-19 pandemic.

Britain’s budget deficit in the first half of the fiscal year, from April to September, climbed to £208.5bn – the highest since records began in 1993 – as extra spending was needed to pay furlough wages and support businesses.

Britain has suffered Europe's highest death toll from coronavirus, as well as the severest economic hit of any major advanced economy. Cases are now climbing again rapidly, with a record 26,688 new cases reported on Wednesday.

Without extra support, unemployment is forecast to rise by more than 1 million before the end of the year.

Restaurants and pubs in areas under tier two rules, meaning there is a “high” risk of infections locally, are required to close by 10pm and separate households are banned from mixing indoors.

The government has clashed with regional politicians in north-west England over the scale of aid available to businesses and workers in areas which have had the highest level of restrictions.

Andy Burnham, the mayor of Greater Manchester, said he would be “looking closely” at the announcement, after he was embroiled in debates with ministers for days over what support businesses in his region should get for their move into tier three, the highest risk category.

“Greater Manchester has been in ‘high’ alert for three months but our hospitality businesses haven’t had any emergency support,” he said.