As footfall plummets, Sunak and Johnson are discussing rescue bailout options for pubs, restaurants and shops.
As fears grow over a tide of corporate collapses caused by the Omicron variant of Covid, Rishi Sunak is understood to have held emergency talks at the weekend with Boris Johnson to confirm a rescue scheme for businesses.
In the midst of mounting alarm that firms will face a sudden drop in footfall and severe staffing problems with as many as a million people a week self-isolating, the Chancellor was expected to discuss bailout options with the PM.
Mr Sunak held a series of calls with business groups on Friday afternoon to discuss rescue choices. The discussions between the Treasury and PM were made known in a call between Mr Johnson and Nicola Sturgeon, the Scottish First Minister, who ramped up the ‘extreme urgency of the crisis’ as Covid-19 cases rose to a record 93,000.
A spokesman for the Chancellor promised to ‘engage constructively’ with businesses to support them during the slowdown. Despite chief medical officer Chris Whitty calling on the public to limit their socialising, the Treasury has offered no new bailout support measures to venues as they are legally permitted to remain open.
Dr Whitty’s warning has pushed the UK into
a ‘stealth’ lockdown, hitting hospitality companies with a raft of booking cancellations.
A spokesman for Ms Sturgeon said the Prime Minister ‘agreed that there needed to be swift engagement with the Treasury as to the immediate action needed, and committed to further talks over the weekend’. Mr Sunak held more discussions with business groups on Friday, following criticism for leaving the country while companies were pleading for bailout support.
The Chancellor, who returned to the UK early to manage the crisis following meetings with tech executives in the US, listened to concerns from the British Chambers of Commerce (BCC), the CBI and the Federation of Small Businesses (FSB). Colleagues said Mr Sunak was in ‘listening mode’ without offering any new promises of taxpayer bailout support in the one-to-one calls with business representatives. One source said it was more a case of him asking how things were going.
Call for Sick Pay Rebate for SMEs
The FSB has urged the Treasury to reinstate rebates immediately for small businesses unable to afford the £96 a week statutory sick pay over 14 days. The scheme cost the Treasury £50m last year. Craig Beaumont, the organisation’s chief of staff, said small hospitality firms are calling for an effective bailout package of support in England, after similar enterprises in Scotland and Wales, with less Omicron, have gained financial support from their administrations.
Across the whole economy, Mr Beaumont said, there will be perhaps one million people sick or self-isolating by the new year, so the Covid Statutory Sick Pay Rebate for small employers needs to be reintroduced, straightaway.
The calls came as figures showed councils have failed to distribute almost £600m of Covid grants for struggling pubs and restaurants. Local authorities are sitting on the financial aid for businesses allocated during the last winter wave despite being warned by ministers to speed up support.
The Treasury spokesman added that the Chancellor recognises how important the festive season is for so many businesses and the Government will continue to consult as to how it can best provide ongoing bailout support to the businesses affected.
Fears of housing market crunch
Meanwhile, families face more pain from rising interest rates after the Bank of England’s chief economist warned that further increases are likely to be needed in the battle to contain inflation, following Thursday’s increase to 0.25pc from the Covid emergency level of 0.1pc.
Threadneedle Street expects price rises to peak at 6pc in April.
The warning suggests that the nearly 2m homeowners whose mortgages track the Bank rate will face further increases in their payments within months. This will add to fears of a housing market crunch, after more than a decade of of ultra-low rates pushed prices to record highs. Capital Economics warned on Thursday that if the Bank rate rises to 2pc, the property market will fall in ‘correction territory’, meaning a drop of 10pc or more.