The new tiered restrictions are moving the goalposts for businesses. Accountants report a wide range of reactions from their clients.
Meanwhile, the Government has responded unusually fast to criticisms, with the Chancellor announcing another emergency help plan to the House of Commons.
Emergency help announcement 22 October
The Chancellor has just announced a range of new emergency measures in response to criticisms about the impact of tiered lockdowns.
Cash grants of up to £2,100 will be made available through local authorities for firms in Tier 2 areas – enough for all affected hospitality, accommodation and leisure premises. They will be retrospective, so any region which has been under enhanced restrictions can backdate their claim to August.
For self-employed people, the size of the grant they can access will also be doubled to £3,750 – with the amount of average profits they can claim for rising from 20% to 40%.
There will also be major changes to the Job Support Scheme:
- Employees will only need to work 20% of their normal hours – instead of the original 33% – to be eligible.
- And the government will significantly reduce the amount employers have to contribute – from 33% to 5%.
AAT will provide a more detailed update as HMRC makes information available.
Businesses are still adapting to the new tiered lockdown, announced last week, puts various regions across the UK under different rules. Certain regions were moved into tiers two and three over the weekend, followed on Tuesday by Greater Manchester, after local officials contested the decision.
The tier system works like this, with some regional variations:
- Tier one, or medium, continues the already established ‘rule of six’ and the 10 pm curfew for hospitality venues
- Tier two, high, extends the rule of six to apply to outdoor spaces, and no two households are allowed to mix indoors
- Tier three, very high, extends the ‘no households mixing’ rule to outdoor spaces, and closes pubs and bars unless they can operate as restaurants. People are also advised not to travel
These rules have already thrown up several contentious points, such as the lack of clarity over what classifies as a ‘substantial meal’ to allow pubs and bars to remain open. There has also been pushback about the blanket application of the tier system in some regions, such as the Wirral and south east London.
We asked accountants for their thoughts on the scheme and how it’s affecting their clients.
It feels like there’s no master plan
David Fort, Managing Partner, Haines Watts Manchester
The move to Tier three will be disastrous for businesses, especially in hospitality, and would hit business and consumer confidence.
Businesses need stability and certainty. If they have that then it’s amazing how robust and agile our clients can be. But the Government’s constant changes and negative stories in the press have damaged confidence, and patience is wearing thin.
Clients are just confused, angry and confused again. They are trying their best to adhere to the changing situation and make plans, but are exasperated by the Government’s mixed messages. As Greater Manchester moves to Tier three, I can’t help concluding there is no master plan and it feels like the Government is playing politics with people’s livelihoods and lives.
Are they really following the science any more? Where are the facts? Especially on hospitality who feel like scapegoats. The main impact on Tier three is on hospitality. If the science is that damning on an area, isn’t total lockdown the only possible solution?
Verdict: Tier three could be a disaster for many businesses, and many clients are exasperated.
Tier three will have a knock-on effect beyond the hospitality sector
Rebecca Bradshaw, director, Rotherham Taylor Limited, Preston
The Tier three restrictions look as if they will have a very significant impact on some of our clients and the local economy as a whole. Those that are forced to close – pubs and bars in most circumstances, as well as casinos, bingo halls, betting shops, gaming centres and soft play operators – are clearly the most severely affected.
However, these closures have a knock-on effect on the businesses that supply those that are unable to trade, especially in the hospitality sector. At the moment, all businesses can furlough staff that have been furloughed previously. However, from 1 November, only businesses that are legally required to close will be able to claim support in respect of employees who cannot work through the Job Support Scheme (JSS).
Similarly, only businesses that have been legally required to close will be able to access grants from the Local Restrictions Support Grant Scheme. Other businesses will only be able to use short-time working of at least 33% of an employee’s usual hours under the JSS, while paying 55% of their usual wages, which although is a contribution it could still be very challenging for employers to cover the 55% cost if most of their business has dried up.
We are working closely with our clients to support them in dealing with the challenges they are facing. However, we would like to see further support for those that are legally able to open but that have seen trade collapse as a consequence of the restrictions.
Verdict: The tiered restrictions will have a farther-reaching effect than people might think.
The tier system is unfortunate but necessary
Craig Billington, accountant and business advisor, Kirkwood Wilson Lancashire
Unfortunately, these tier changes are required, with cases on the rise. Personally, I feel our local regions will dip in and out of the higher tiers over the coming 12 months unless a vaccine is approved soon. Where possible, businesses now need to find ways of coping with the relaxing and tightening of restrictions.
The majority of clients have remained open since the new tiering system was announced. We have a few that have been forced to close, and some within the hospitality and leisure sector who might be forced to reopen once the furlough scheme is wound up at the end of the month. I think as we get deeper into the Tier three lockdown, it’ll become more apparent as to how clients will cope.
For us, the message remains the same; we’re here for our clients and are open for business. We’ve continued to trade and grow our team even during lockdown, with our clients needing to lean on us now more than ever.
The best advice we can give right now is not to panic. Use any spare time to take stock of things and look for ways to reduce overheads. Sanctity can often be found in times of adversity, and many businesses are diversifying their trade portfolio to help reduce the risk to the business as rules change. If a client is concerned about their business, they should talk to their accountant, they may be able to help.
Verdict: The full effects are not clear yet, but most clients are coping.
Tier three would be preferable to Tier two in some cases
John Lawrence, director, Guida Accountancy
We’re Tier two at the moment, but I know from speaking to people in the hospitality sector that quite a few of them would prefer to be in Tier three because they fear that Tier two will adversely affect their business, but they won’t get the support that businesses in Tier three gets.
Most people also don’t seem to know what the rules are. There are very mixed messages coming out at the moment, and people are very unclear as to what’s actually going on. Most businesses feel like they’re being punished a little bit. Here in Essex, we had a bit of a warning that it was coming, as we heard that Essex County Council was applying for Tier two status. We had about a week where we knew we were going to go into Tier two.
We’ve got two unitary authorities that are separate from Essex County Council. I’m in the Castle Point area, which is under Tier two restrictions, but if you go two miles down the road to Southend, you’re in Tier one. It’s really strange. You have far more freedom in Southend, even though the number of cases is just as high as Castle Point.
I have clients that are under Tier two restrictions and others, a mile down the road, who are not. So we’ve had to juggle it as well. Accountants have two, possibly even three systems that they have to work to, and it’s a bit of a headache.
Verdict: The new restrictions have created more admin for us, and confusion for clients.
SMEs can react swiftly, but they are increasingly disillusioned
Simon Young, managing partner, Aysgarth Chartered Accountants
A lot of clients are surviving the best they can in these strange times. Being small and medium-sized businesses they can react swiftly to any changes that are imposed. There is a lot of bad feeling towards the Government. It is seen as remote, clueless, London-based and unable to follow the rules they have set for everyone else.
The support that was provided earlier in the year was random, with winners and losers. Obviously looking after the health of the nation is critical but if the Government closes businesses down, the Government should compensate them and their staff.
Many clients are back working in their offices and units. Some of them literally could not function by working from home. Any restrictions that will be imposed on Leeds and West Yorkshire will have a short effect but in the long term, I suspect most of our clients will survive as there are certain sectors we do not touch and many clients are winning new contracts, with some taking on extra staff.
Verdict: The new system will do nothing to curb businesses’ bad feeling towards the Government.
Mark Rowland is a journalist and former editor of Accounting Technician and 20 magazine.