The chancellor has revamped his first effort at a loan scheme for businesses to tide them over the worst of the lockdown. Gone are restrictions that meant small companies needed to find collateral to back the loans, putting their homes at risk. Larger firms, discouraged by demands that they first seek commercial loans, found the new scheme allowed them to approach lenders for an interest free 12-month loan with an 80% government guarantee. Rishi Sunak believes all firms should be able to benefit from his freshened-up range of loan schemes, but not everyone is so sure.
Package travel operator
Marc Vincent, finance director of Newmarket Holidays, says the firm sells 80,000 holidays a year and around a third are sold online. Now he is deluged by customer inquiries. That has meant he cannot furlough staff: it’s all hands to the pumps.
“If tour operators are allowed to go under, it will be like a run on a bank, with a long chain of suppliers also affected,” he said. “And then the government will need to bail out customers anyway, so much better to do it now.”
With no money coming in and unable to take advantage of the furlough scheme – which allows firms to send workers home while the government covers 80% of their salary up to £25,000, capped at £2,500 a month – the business is suffering. Of 148 staff, only 52 have been furloughed.
To benefit from a VAT holiday until the summer, staff have spent the last week delving through payments, though he says the savings are limited.
Regulations that give customers the right to demand their money back on package holidays within 14 days of cancellation should be changed, he says. Instead, travel firms should be allowed to offer credit notes that can be redeemed after two years if they are not spent. “Other EU countries are doing this and so should we.”
Princess employs 3,000 people in Plymouth. Last year it posted a £30m operating profit for 2018 on turnover of £340m. Today its £600m order book is effectively frozen. The factory where some of the most spectacular yachts in the world are constructed is shut down and 70% of staff are at home.
Chairman and chief executive Antony Sheriff was disappointed with Sunak’s first effort at a loan scheme for medium-sized companies like his when it insisted they must access commercial loans – a costly and cumbersome procedure. The reforms mean the company will now examine them favourably. “I think he has done a good job,” says Sheriff.
The 55-year-old company has cash in the bank and could withstand several months of a lockdown, he says, but he is concerned about the costs of starting up again in the summer or autumn, which could mean outlays for materials would be prohibitively expensive.
“We make everything on our boats, from the hull to the furniture. It all happens here. We account for about 15,000 jobs in the Plymouth area and the ease of getting back into production is key,” he says.
Any thought of profits this year have evaporated. “Everybody will look back at 2020 and say what a shame, but I hope not too many people will focus on the financials in a year that is pretty much a write-off,” he says.
There are officials inside the Treasury who consider universities the linchpin and economic driving force of many towns and cities in Britain. Huge employers, they are also tied into the local economy through relationships with businesses and state agencies, including the NHS.
Richard Dale, the finance director at Newcastle University, says it has paused building work to save cash and switched to remote working and remote teaching to keep students on track. But he expects a big drop in the £90m a year the university receives from foreign students. They make up 17% of the current university population, excluding EU students, who will be considered foreign from next year should a Brexit deal be completed.
Some staff on fixed-term contracts have had their status paused, he says, while the university looks to place them in other roles. But his main concern is bridging the likely two-to-three-year gap before foreign student numbers return to current levels. “We don’t have the resources to keep research going with financial help from our funders. We don’t get the full economic cost of research paid for other than by cross-subsidy from foreign student income. It has always been an unstable situation that the pandemic forces us to address,” he says.
“I have been talking to our management team about government funding and how the travel industry has reacted passively while airline businesses like Virgin Atlantic have said a subsidy is desperately needed,” says Peter Deer, managing director of Fred Olsen Cruise Lines.
Virgin has called on the government to give the industry up to £7.5bn in state support. The chancellor rebuffed the call, saying he would only consider support on a case-by-case basis. Despite this setback, Deer thinks the travel industry should be making more noise.
The company, which has a turnover of £200m-£250m, has four ships laying up in the Firth of Forth and a fifth, the Braemar, about to leave Southampton to join them. About 300 of the firm’s 500 staff in Ipswich are home-working while they deal with customer inquiries, many of them about lost bookings. The rest are at home not working.
“We are using the furlough scheme, and that is great, but there are many other costs we face,” he says, adding that the government should be working harder to prevent the industry shrinking.
“The drop in cruise-ship business has come as a huge shock to our suppliers, the majority of which are in the UK. There are 40,000 people in the industry and they are being completely overlooked.”