Labour: £50m furlough bill on the way to closed or seriously struggling businesses

New analysis by the Labour Party has revealed the £50m bill Ministers are forcing struggling businesses to pay in July, despite the serious impact upon them of ongoing restrictions. From 1 July, all businesses including in sectors hardest hit by restrictions will be forced to contribute 10% towards the cost of furloughing employees. Ministers have refused to push back this date in tandem with the delay to the roadmap - meaning businesses forced to pay will include those still legally closed or operating at a significantly reduced capacity.

In just a couple of weeks, employers will therefore face a choice between paying £122.80 on average per every employee whose job they want to protect, or removing staff from the payroll. That includes businesses still unable to open like night clubs and live music venues, as well as those facing huge financial difficulties in light of ongoing restrictions including travel agents and airlines, events spaces, pubs and bars, and businesses in the wedding industry.

On 1 July, Ministers will also begin withdrawing the 100% business rates relief for retail, hospitality and leisure businesses. That means businesses will have to contribute 34% towards their monthly business rates irrespective of their trading status. The average night club will have to pay £718 in July, the average bar will have to pay £500, the average restaurant will have to pay £598, and the average theatre will have to pay £1,048.

Labour has called on the Government to:

• Delay the increased employer contribution to furlough, given that most of people remaining on furlough are employed in the sectors affected by the ongoing restrictions – hospitality, live events, accommodation and tourism.
• On business rates relief, learn lessons from the Labour-led Welsh government, which has given the vast majority of businesses 100% business rate relief for the course of this financial year. In contrast, the Conservative government is sending out bills to businesses that cannot fully open.

Shadow Business Secretary Ed Miliband said:

“Businesses have done right by our country during this crisis and the Government must do right by them. But Ministers have repeatedly failed to grasp the simple principle that public health restrictions must be matched by fair economic measures.

“A month’s delay may seem like a short time, but for businesses legally closed from trading or those hanging on by their fingertips from going under and relying on the summer season the delay is another blow. That businesses unable to reopen are being sent huge bills defies logic. Unless Ministers take action, we risk pushing more firms over the edge."

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Notes to Editors

The November 2020 EFO estimates the average Monthly Subsidy for furloughing an employee at £982 between November and March 2021. As that’s 80% of wages, paying 10% would cost around £122.80 a month per employee on average.

Estimates using ONS data suggest that in the broader ‘accommodation and food services activities’ group, even at the end of May 14% of the workforce was on furlough. In the arts, entertainment and recreation sector 21% of the workforce was on furlough.

VOA data on rateable value (here) shows the median rateable value for different type of businesss, which on the 2021-22 multiplier means we can work out the average business rates bill (before any non-covid reliefs from central or local govt) and the amount a business will have to pay when 100% business rates relief is tapered to 66% business rates relief on 1 July.