August 15, 2022

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The coronavirus pandemic and corresponding lockdowns have had a negative impact on almost all sectors...

The coronavirus pandemic and corresponding lockdowns have had a negative impact on almost all sectors of the economy.  UK Gross Domestic Product went from +1.4% in 2019 to -9.8% in 2020 – far worse than the global financial crisis of 2009.  The fallout from this caused mass job losses and many businesses to fail, in spite of the government furlough scheme.

The hospitality, leisure, and retail sectors

While customer-facing sectors were hit hard by the enforced closures of 2020 and 2021, they did receive help from the government in the form of grants and business rate holidays.

Retail, hospitality, and leisure businesses in England received a 100% business rates holiday through the expanded retail relief in 2020/21. The holiday was been extended for the first three months of 2021/22. A 66% relief is going to follow from 1 July 2021 to 31 March 2022. 

In addition, retail, hospitality, and leisure businesses were entitled to the expanded retail relief of £10,000 to those with a rateable value below £15,000. Or £25,000 for those with a rateable value over £15,000. Once the schemes closed, £11.1 billion had been paid out to over 906,600 businesses. 

As well as this, the government recently announced another package to help businesses in the hospitality and leisure sectors who have been hit by Omicron. The deal is worth £1 billion and is designed to cover trading hits over the Christmas period.  Under the support announced on December 21st, hospitality and leisure businesses in England are eligible for grants of up to £6,000 for each of their premises, accounting for almost £700 million of the new package. This follows an equivalent grant made to hospitality businesses earlier in 2021.

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Furthermore, Restart Grants will support businesses in the 2021/22 financial year. Grants will once again be only available to retail, hospitality, and leisure sectors.  Grants can be claimed for each property occupied by a business, and the amount will depend on the property’s rateable value. 

So this wide variety of support has really propped up businesses in the retail, hospitality, and leisure sectors. But what about businesses in other sectors who have not received anything?  Those who supply businesses that have been forced to close will have taken a massive hit with a sudden drop in demand.  They, however, have not been entitled to any grants.

The manufacturing sector

An economic report into the regional impact of the coronavirus lockdown has shown that UK manufacturing is the sector’s hardest hit, largely due to falling consumer demand.

According to UK Powerhouse, a report by Irwin Mitchell and the Centre for Economic and Business Research (Cebr), UK manufacturing sector GVA has fallen by 75% a day – a loss of £540m.  A lack of demand, along with supply chain issues has caused this. Certain subsectors such as food production, pharmaceuticals, and soaps still functioned but apart from that, UK manufacturing almost completely shut down during the pandemic as a result of demand reductions.

So why have some businesses been dished out grants, while others, who are equally struggling, received nothing?  Could it be that the consumer-facing businesses are the ones in the public eye so helping them to survive carries more political capital than helping the thousands of other, hidden businesses in the background?  No one wants to see their favorite retail and leisure businesses go to the wall, so the government steps in to save them.  But what about all the others?

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The events industry

The events industry has been hit hard by the pandemic, all events were canceled for 18 months.  But while the venues were able to claim support, all the businesses supplying the events industry had to ride out the storm with no business and no support. 

Quadrant2Design, an exhibition stand contractor has faced an extremely difficult 2 years.  MD Alan Jenkins said “Everything stopped overnight.  We had to cut back to a skeleton staff in order to survive.  I worked alone in the office over the winter of 2020/2021 with no heating on to save money.  We cut costs everywhere we could think of, including selling our vans. Fortunately, we had good business reserves to get through it, and are back up and running, but the majority of the industry aren’t that lucky and many haven’t survived.  And although events did restart last year, the Omicron uncertainty has put a stop to them again.  We just don’t know when this is going to end, or whether we will make it through.” It’s a sentiment shared by many other businesses in the events industry and other sectors.

Hidden businesses suffered

Why were business rates only cut for those in the retail, hospitality, and leisure sectors? What about all the other businesses affected by lockdowns?  Yes, it’s great that the pubs, hotels, and shops were able to survive on grants, but what about their suppliers who saw business disappear overnight?  Many failed, which is why there are now supply chain issues which are affecting all the businesses who were propped up by the government. 

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Support should have been based on need rather than visibility.  It’s just not fair to prop up businesses in the public eye and leave others to sink or swim.  The government has been able to give the public the impression that these industries have been fully supported because the visible businesses have been. But all the others in the background have not.  The only option for these businesses and those in other sectors have been loans provided by the government.  Yes, these had low-interest rates, but they still need to be paid back, unlike the grants.

The future

For those businesses that have survived the last two years, things are still currently uncertain.  There is the looming threat of a lockdown due to Omicron, further restrictions have not been ruled out by the government.  But even without restrictions, demand within the hospitality and leisure sector has decreased due to people’s fears of the virus.  This will affect businesses in the supply chain who don’t receive grants.

But the economy generally has bounced back well, and GDP is only 0.5% lower than in 2019. So as long as Omicron and future variants don’t put us into another lockdown, those who have weathered the storm should be ok for now.