Labour warns businesses face ‘triple whammy cash crisis’ as Chancellor’s ‘sleight of hand’ on lockdown support revealed
Labour is today warning that businesses face a ‘triple whammy’ cash crisis in the critical run up to Christmas trading, as new analysis shows that non-food retail, hospitality, leisure and cultural businesses and organisations across the UK have seen a £61 billion hit to their takings so far this year compared to 2019.
Labour is warning that businesses face a cash crisis at the most crucial time of year for many companies even as business costs such as rent and overheads, loan repayments, and contributions to the new furlough scheme mount up.
Analysis shows that:
- In the last year, UK businesses in shutdown sectors like hospitality and leisure have so far seen turnover tumble by up to half compared with 2019 figures;
- As the critical Christmas period approaches, billions of pounds of turnover is at stake threatening business viability, and jobs – non-food retailers take a fifth of turnover in the run up to Christmas (£39 billion), twice as much as takings in January and February;
- The situation for many businesses has worsened, even before the second national lockdown. Businesses in accommodation and food services, and those in arts, entertainment and leisure report that turnover had fallen by 79 per-cent and 71 per-cent compared to what is normally expected in October. 7 in 10 food and accommodation services businesses also reported that their profits were down by more than 20 per-cent over the same period with nearly 4 in 10 down by more than half. Alongside this, 4 in 10 food and accommodation services businesses say that they either have no cash reserves or they will only last 3 months.
Labour is also pointing to the Chancellor’s ‘sleight of hand’ on business grants during further lockdowns. Rishi Sunak declared he was introducing ‘bigger grants for businesses’ with businesses eligible for up to £3000 per month in grants, Labour can reveal that the vast majority of firms will get much less than this.
Investigation of the business grants small print shows that:
- The Local Restrictions Support Grants launched by the Chancellor for the second national lockdown are just a fraction of what they were in March. The smallest rateable value businesses will be eligible for just half of the weekly cash amount they received in March, and businesses with a rateable value between £15,000 and £51,000 will receive less than a third of the weekly amount from the first lockdown.
- House of Commons analysis shows that 99 per-cent of hair and beauty salons would receive less support than in March, 97 per-cent of betting shops, 95 per-cent of cafes, 92 per-cent of gyms and 77 per-cent of pubs and restaurants.
- Alongside this, the Chancellor’s last-minute policies are hurting firms. Businesses say that the government’s last minute scrappage of the Job Retention Bonus will affect those who had already priced it in. ONS survey data shows that nearly half of businesses in the hospitality and leisure sectors were expecting to access the Job Retention Bonus.
Lucy Powell MP, Labour’s Shadow Minister for Business and Consumers, said:
“The Coronavirus crunch has wiped billions of pounds off company balance sheets and with the Chancellor’s sleight of hand on business grants, many firms are now facing a cash crisis that has his name all over it.
“The run up to Christmas is an absolutely critical time of year for so many businesses on our high streets facing a triple whammy of tumbling turnover, plummeting profits, and crumbling confidence as a result of the government’s failure to tackle the Coronavirus.
“Many companies are hanging on by their fingertips, if they are left to go bust by the government, we’ll see a bleak mid-Winter for many, and an avalanche of job losses.”