U.K. Treasury Pledges to Do ‘Whatever It Takes’ for Hospitality

(Bloomberg) -- The U.K. Treasury said it will do “whatever it takes” to support hospitality and other businesses hit by mass cancellations as households voluntarily isolate before Christmas, but stopped short of announcing any new measures.

Officials will review their options over the weekend, when the government will hold an emergency COBR meeting to address the health and economic risks posed by the omicron variant of coronavirus.

U.K. chancellor Rishi Sunak flew back from a work trip to California on Friday to “continue discussions with industry leaders,” the Treasury said. The immediate goal is to ensure companies get access to 250 million pounds ($330 million) of unused grants held by local authorities.

Further help in the form of millions of pounds of additional grants, new emergency loans, forbearance on existing Covid loan repayments and tax relief are being considered. 

However, the Treasury is reluctant to reopen the furlough job support program that was the main means of help for companies and households in the earlier stages of the pandemic. 

Unions and some economic think tanks have called for furlough to be reintroduced but business groups are only demanding it if restrictions are extended.

Christmas Plans

On Dec. 8, the prime minister told the British public to wear masks in most public indoor venues, to work from home if possible and to show an NHS Covid pass to get entry for nightclubs. Since then, bookings have been cancelled as people prioritize their Christmas plans.

A survey by UK Hospitality, the trade body, found that in the 10 days to Tuesday, half of all Christmas bookings were cancelled, costing businesses in the sector more than 2 billion pounds in lost sales. The British Beer and Pub Association estimated that pubs would lose out on 297 million pounds worth of trade over the Christmas period and more than 3 million bookings at pubs had been cancelled.

One of the chancellor’s main considerations when calibrating support is the speed at which omicron will rampage through the population, said Tim Pitt, an adviser to a previous chancellor who is now a partner at Flint Global, a political consultancy.

Another consideration is Christmas, as households scrap non-essential plans to prioritize family gatherings. After the festivities, many may return to social settings on the assumption that vaccines and boosters are providing sufficient protection, Pitt added.

The two variables, the timing of the peak and the behavioral response after Christmas, will determine how much damage is inflicted on hospitality, nightclubs, theaters, tourist venues and live events. For the Treasury, the calculation is how long it can hold off calls to reopen the furlough scheme.

Short-Term Crisis

Business groups expect the Treasury to announce grants, loans and tax relief to ease a short-term cash flow crisis and to promise to reintroduce a sector-targeted and time-limited furlough if the virus and hospitalizations don’t recede in the New Year.

Simon French, chief economist at Panmure Gordon, said the problem with grants and other short-term measures to protect corporate cash-flow is that they do not prevent companies from laying off staff. Furlough incentivizes businesses to hold on to workers by tying the support to the employees.

A Treasury spokesman said the government will “continue to do … whatever it takes to support lives and livelihoods throughout this pandemic.”

“The Chancellor spoke to business and industry leaders this afternoon,” according to a statement Friday. “We recognize how important the festive period is for so many businesses and the government will continue to engage constructively on how it can best provide ongoing support to the businesses and sectors affected.”

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