Rishi Sunak insisted the government was “not closing down businesses” today as he cut short a trip to California amid a growing backlash from firms demanding more state support to weather a sharp rise in Covid cases.
The chancellor resisted calls for more help as businesses reported an alarming drop-off in trade in response to the rapid spread of the omicron variant.
He pointed to existing measures including business rates relief, a reduced rate of VAT and around £250m available through local authorities.
“My immediate priority is to make sure that money gets to those businesses as quickly as possible,” he told US broadcasters. “I appreciate that it is a difficult time for the hospitality industry, that’s why I was on the phone earlier today with various industry leaders from the hospitality space.”
The chancellor brought forward his return flight from California after facing mounting criticism that he was not in the country to oversee the financial response to a rapidly deteriorating situation.
Industry groups issued a desperate plea for help during crisis meetings with senior Treasury officials on Thursday, expressing frustration that the government’s increasingly bleak public health messaging has not been matched with economic assistance.
The chancellor is understood to have held one-on-one talks with three senior hospitality industry figures on Thursday but no package of state help for the sector has yet been announced.
He did not attend a roundtable of the UK’s largest trade bodies and business groups, where Treasury officials were told that firms now face “unsustainable losses” in the vital period running up to Christmas, according to one attendee.
“These are not just any old weeks, these are Christmas weeks. The bounce-back won’t happen in January because trade is always slower in January,” the person said, adding that the Treasury gave “no indication” there would be any further support.
Hospitality firms have been hardest hit as people stay home and cancel bookings. The industry’s trade body is calling for cash grants to cover staff costs, business rates relief and a further cut to VAT in order to help them through what is set to be another difficult winter.
Fears are growing that tighter restrictions will be enforced after the UK recorded 88,376 confirmed cases of Covid cases on Thursday – the highest daily total so far – with numbers expected to surge far higher over the coming weeks.
Retailers warned that UK high streets face a wave of business closures in the new year unless financial support is offered quickly.
Andrew Goodacre of the British Independent Retailers Association estimated footfall was down by 35 per cent this week compared to pre-pandemic levels
“Each government announcement seems to bring more bad news. Our concern is that people aren’t shopping on the high street, they are holding off spending because they are worried or they are shopping online,” he said.
While businesses may survive into the new year, some are likely to run out of cash during the lean months of January and February, he said.
“Businesses are planning for next year and there's a growing fear we will have another lockdown,” he added. “What they need is to know that support will be there, if it comes to that.”
He warned that, without certainty, businesses will have to start making staff redundant.
He said: “No one wants to get there but the minimum we need is for the chancellor to say ‘if we have to close you down, support will be there’.
“Otherwise they have to plan for the worst-case scenario of a shutdown without any help. The silence from government makes them more concerned.”
While ministers have not yet ordered any further public health restrictions, retailers reported a sharp drop off in visitor numbers, with central London particularly badly affected following an order to work from home where possible.
Paul Davies, chief executive of Carlsberg Marston’s Brewing Company, said he had “growing concerns” about a “dramatic change in demand, as seen across the industry”.
“Operating a hospitality business, while not officially in lockdown, but with no customers, and no furlough support, will place an unacceptable financial strain on pubs and brewers just as we are recovering from 2021.”
He warned that, without further support from the Treasury, more pubs will be lost across the UK, “which would be catastrophic for the communities in which they operate and the wider British economy”.
Retailers fear that they too will be hurt by a sharp decline in visits to pubs and restaurants which will mean fewer people going to town centres.
“I’m part of a community of businesses and we’re all part of each others’ success,” said Cathy Frost, owner of Love One, a gift shop in Ipswich.
“We’ve got a load of coffee shops and restaurants here and they are taking a massive hit to lunchtime trade and Christmas bookings. We need customers to keep coming to the high street.”
“I can’t stress how important these days before Christmas are. This is mentally the toughest time I’ve had in 14 years of running this business.
“The messaging from government has been catastrophic.”