UK businesses in Tier 2 lockdowns get extra government support

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·4 min read

Watch: Chancellor announces financial help for Tier 2 businesses

The UK government has announced new measures to support businesses and employees hit by Tier 2 local lockdown restrictions.

Chancellor Rishi Sunak on Thursday told parliament that hospitality businesses in Tier 2 areas would be eligible for new grants. The chancellor also announced more generous support for jobs across the UK and doubled grants for the self employed.

Sunak said “open but struggling” businesses in Tier 2 lockdown areas could now claim up to £2,100 ($2,750) a month. The grants for businesses in hospitality, leisure, and accommodation will be backdated to August, meaning businesses under restrictions can claim up to £4,200 from today.

The Treasury said 150,000 businesses could benefit. The support could total as much as £1bn.

EMBARGOED TO 1200 THURSDAY OCTOBER 22 Chancellor of the Exchequer Rishi Sunak hosting a roundtable for business representatives at Franco Mana in Waterloo, London. The Chancellor is set to announce a new support package for businesses affected by Tier 2 restrictions.
Chancellor of the exchequer Rishi Sunak hosting a roundtable for business representatives at Franco Manca in Waterloo, London. Photo: PA

READ MORE: UK government debt at highest level in 60 years

Alongside the new grants, Sunak extended the government’s Job Support Scheme. Under the programme, which tops up the wages of part-time workers, staff will now need to work just 20% of their usual hours to qualify for support. The scheme originally required people to work 33% of their regular hours. Employer contributions towards unworked hours have been cut to just 5%. The changes apply nationally.

“More jobs will be protected,” Sunak said, calling it “one of the most generous short time work schemes in the world.”

Finally, Sunak announced new grants for the self-employed worth 40% of past earnings — double the level of previous grants.

Outcry from firms in ‘worst of both worlds’

Thursday’s announcement marks the third package of COVID-19 support announced by the chancellor in less than a month.

At the end of September, Sunak announced a new “Winter Jobs Plan” to replace the furlough scheme, promising to top up wages of people working part time. He was forced to go further earlier this month and offer support to firms and staff ordered to close as part of local lockdown restrictions.

“I’ve always said that we must be ready to adapt our financial support as the situation evolves, and that is what we are doing today,” the chancellor said on Thursday.

“These changes mean that our support will reach many more people and protect many more jobs.”

The latest package of support follows outcry from business groups over the treatment of firms in Tier 2 lockdowns.

Under the government’s three-tiered system, only businesses in Tier 3 qualified for state support. Hospitality firms complained that Tier 2 restrictions — which stop households from mixing indoors in any setting — would devastate pubs, restaurants, and bars, while not qualifying them for any support.

UKHospitality chief executive Kate Nicholls said Tier 2 was the “worst of both worlds.” Sunak met with business leaders from the industry earlier on Thursday.

“It is clear that even businesses who can stay open are facing profound economic uncertainty,” Sunak told parliament.

‘Significant improvement’

Business leaders cheered Sunak’s announcement but said more support was needed for the self-employed.

Dr Adam Marshall, director general of the British Chamber of Commerce, said the new package of support was “a very significant improvement” that would “go some way to alleviating pressure” on companies.

Jonathan Geldart, director general of the Institute of Directors, said the changes were “welcomed” but said there was still a “glaring gap” in support for the self employed.

“The exclusion of small company directors, a major part of the dynamic entrepreneurial heart of our economy, from key support schemes becomes all the more pressing as the virus wears on,” Geldart said. “It’s deeply frustrating that this issue still hasn’t been addressed.”

The Association of Independent Professionals and the Self-Employed estimates that around a third of the UK’s self-employed people are excluded from government support. The Association echoed Geldart’s call for more support, as did the Federation of Small Businesses.

The government has so far spent £200bn ($263bn) to support the economy since the onset of the COVID-19 pandemic in March.

WATCH: What is a budget deficit and why does it matter?