On 3 March 2021, the Chancellor delivered the Spring 2021 Budget. Now, over a month on, what are the key employment announcements for the food and drink sector as we see the industry opening its doors?
Extension to the Coronavirus Job Retention Scheme
The CJRS had previously been extended until 30 April 2021. However, the Chancellor has now extended the furlough scheme for a further five months from May until 30 September 2021. Employees will continue to receive 80% of their current salary for hours not worked. As well as this, there will be no employer contributions beyond National Insurance Contributions and pensions required in April, May and June. From July, the government intends to introduce an employer contribution towards the cost of unworked hours. This will be 10% in July and 20% in August and September.
How will the extended furlough scheme affect those in the food & drink industry?
As we see businesses opening back up, the extension of the furlough scheme remains an important lifeline to avoid the cliff-edge of job losses throughout the hospitality and wholesale sectors. The Chancellor has pointed out that there have been 150,000 businesses in the hospitality industry employing 2.4 million people that have been heavily affected by the pandemic. This further extension of five months offers a much needed comfort to those in struggling businesses as we emerge from the most recent, and hopefully last, lockdown.
The extension is intended to protect millions of jobs and will ultimately help reduce the waves of closures caused by the pandemic. The extension will allow businesses within the food and drink sector to more carefully plan their escape from lockdown as we start to see restrictions eased and greater freedom of movement. It will also allow businesses to bring back staff in a more measured way over a longer period of time.
Chief Executive of the Food and Drink Federation, Ian Wright, was generally positive about the update and believes food and drink manufacturers will welcome the news, commenting: “The Chancellor’s announcement struck the right balance between supporting recovery and acknowledging the difficult choices that have to be made to restore the country’s finances.”
He goes on to say: “Food and drink businesses supplying the hospitality and food service sectors will welcome the extension of the furlough scheme.”
Extension to business rates holiday and VAT discount
The Chancellor also exempted hospitality businesses, including restaurants and pubs, from paying business rates last year, but that tax holiday was due to end in March. These businesses will now be exempt until the end of June. After that, they will be discounted to one third of the normal charge for the rest of the financial year, up to a maximum of £2m for closed businesses.
Furthermore, the VAT discount to 5% for food and drink sold in pubs and restaurants will last until the end of September. The reduced rate of VAT is the minimum allowed by the EU. After September, it will then increase to 12.5% for a further 6 months – with the rate to return to the standard level next April. The cut applies on food and non-alcoholic drinks and will allow the food and drink industry to reduce prices to win back customers.
Business owners will undoubtedly welcome the freezing of alcohol duties which will provide a key incentive for guests to return to venues confidently.
The food and drink industry is a specific industry greatly impacted by the challenges the pandemic has thrown, any financial support being offered by the UK Government would undoubtedly continue to be welcomed. There are some, particularly in the brewing and beverage sector, that believe the budget does not extend to help those business most in need of support.
Are breweries left at a disadvantage?
Despite the extension of the VAT discount, there are concerns from breweries that this does little to help their post-lockdown recovery. Chief Executive of the Society of Independent Brewers (SIBA), James Calder, has stated that the raft of packages do little to help those filling the cellars of Britain’s pubs because the discount does not apply to alcohol. He believes that: “Whilst freezing beer duty is welcome, the Chancellor is still intending to increase the tax bill for at least 150 small breweries from next January with ruinous changes to small breweries’ relief, putting jobs and the recovery at risk.”
Echoing this sentiment, Karen Betts, CEO of the Scotch Whisky Association, commented that a resolution to the 25% tariff imposed on single malt scotch whisky is needed to help the sector. Currently, due to an unresolved trade dispute between the EU, UK and US this tariff is causing real damage to exports to the US.
What is the Government doing to employ more people into the industry?
As part of its Plan for Jobs, the Government previously announced that apprenticeships would be supported by bonuses, with employers entitled to a payment of £2,000 for each young apprentice they take on under the age of 25 and £1,500 for each apprentice aged 25 or over. The Chancellor announced that the payments made to employers in England who hire new apprentices will be extended and increased. Employers who hire a new apprentice between 1 April 2021 and 30 September 2021 will receive £3,000 per new hire, compared with £1,500 (or £2,000 for those aged 24 and under) under the previous scheme.
Employers will benefit from access to a diverse pool of apprenticeship talent. Although this increased apprenticeship funding is for England only, we expect Scotland to follow suit with some form of increased funding.
Other support available
Currently, eligible employers with fewer than 250 employees can apply to HMRC for reimbursement of two weeks' SSP per eligible employee for sickness absence due to COVID-19. It has been confirmed that small and medium-sized employers across the UK will continue to be able to reclaim up to two weeks of eligible SSP costs per employee. However, the scheme is intended as a temporary COVID-19 measure to support employers while levels of sickness absence are high. The Government will set out steps for closing this scheme in due course.
Although only available to businesses based in England, it may be worthwhile to note another measure announced in the Budget includes a business restart scheme, which allocates a total of £5bn in funding for small business grants of up to £18,000; however, part of the criteria for eligibility states that the business was back open for trading on 1 April 2021.
Under the scheme, non-essential retail businesses will receive grants of up to £6,000 per premises, as they are allowed to open first. Hospitality businesses will get grants of up to £18,000, because they will stay closed for longer and will be more affected by restrictions.
It’s fair to say the last year has been incredibly tough but the Chancellor’s announcements along with measures to help the trade, gives the industry confidence to meet the ongoing challenges in these critical months.
This article was co-written by Trainee Solicitor, Nikita Sandhu.