What Does the Winter Economy Plan Mean for Hospitality?

The Chancellor, Rishi Sunak, has today announced a multi-billion pound “winter economy plan”, aimed at avoiding widespread redundancies over the coming months.

The series of measures come as the UK Government this week tightened coronavirus restrictions for hospitality businesses in England - a move that was promptly followed in Scotland, Wales, and Northern Ireland. 

Here is a breakdown of each of the new measures.

New Jobs Support Scheme

The most significant announcement is that the furlough scheme will be replaced when it ends on October 31st. In its place, the Chancellor will introduce the Jobs Support Scheme, modelled on a similar programme used in Germany. 

Under the new scheme, the Treasury will offer "top-up pay" for workers who have been given fewer hours in the crisis. The aim is to keep employees at work, rather than paying them to stay home.

Starting on November 1st, the programme will run for 6 months, and eligible employees must work at least one-third of their regular hours, paid as normal by their employer. The Government will then top-up their salary, covering one-third of their pay, while the employer makes up the other third. 

What this means in practice is that employees could still receive 77% of their wages, despite working only 33% of their hours. In this scenario, the employer would be responsible for contributing 55% of the employee's wages.

The approach is intended to encourage businesses to retain workers in viable jobs while ensuring that other employees are not kept in so-called “zombie posts” that exist only because of the government’s furlough scheme.

SMEs will be the primary beneficiaries of the Jobs Support Scheme, although larger businesses that can prove they have been adversely affected by the pandemic may be eligible. 

Importantly, businesses will be able to claim both the jobs support scheme and the jobs retention bonus.

"Pay as you grow" loans

In what will be a significant boost for SMEs, the Chancellor has increased the terms of government-guaranteed loans for six to ten years, drastically reducing monthly repayments. Loans can also move to interest-only payments or suspend payments if businesses are "in real trouble" for up to six months.

VAT rate extension

In a further boost to the hospitality sector, Sunak also announced an extension of the VAT rate cut. Initially set to run until January next year, the special 5% rate for hospitality and tourism businesses has been extended to March 2021.

Additionally, businesses who deferred their VAT will no longer have to pay a lump sum at the end of March next year. Instead, they will have the option of splitting it into smaller, interest-free payments over the course of 11 months

Find out how to manage the VAT rate change on your Epos Now system.