New virus restrictions in Britain worry companies

LONDON – On Thursday morning, a group of 50 people called to cancel their holiday party booked that evening at Luc’s Brasserie, a French restaurant in the UK capital’s financial district. That same morning, a group of 21 people also canceled their party, also for Thursday evening.

The night before, Prime Minister Boris Johnson announced that stricter Covid measures were coming, and the impact was immediate for Darrin Jacobs, the owner of Luc’s. There have been a “multitude of cancellations,” he said.

But thanks to a waiting list of reservations, he said, the restaurant was still full until Christmas. And many canceled reservations had hopefully postponed their celebrations to early next year.

“We’re not going to lose the business, we’re just going to move the business forward,” Mr. Jacobs said. But “it’s not easy because we’ve already bought food and moved staff,” he said.

For months, businesses across Britain have desperately tried to sidestep supply chain disruptions, labor shortages and rising costs as they emerged from various stages of lockdown.

Offices reopened, filling buses and commuter trains; restaurants and pubs advertised to host end-of-year celebrations; and the queues grew longer in downtown cafes.

Now, the emergence of the fast-spreading Omicron variant has dealt an unexpected blow to these efforts. The government has revived restrictions on coronaviruses that are likely to weigh on hospitality and travel businesses during the critical holiday season and put a damper on the economy.

“I don’t know where it’s going to go next week,” Mr. Jacobs said. “I think it’s a tip of the iceberg-type scenario and it could get worse next week and, if it does, we’ll really have to reduce it.”

For now, he remains cautiously optimistic. But his business relies on people who work in nearby offices and walk to his restaurant in Leadenhall Market, especially several insurance companies. On Thursday, Mr. Jacobs learned that two large companies were once again closing their offices.

In England from Friday, face masks will be mandatory in most indoor public places, including cinemas and theaters. Starting Monday, people who can work from home are expected to do so. And from the middle of next week, passes showing vaccination or a recent negative Covid test will be required for major events and nightclubs, Mr Johnson announced this week. The rules will be voted on in Parliament next week. Scotland, Wales and Northern Ireland have their own measures, which are slightly more stringent.

“Unless you do a full or partial foreclosure, the effect of the measures themselves will be rather small,” said Paul Mortimer-Lee, deputy director of the National Institute of Economic and Social Research in London. “What will hurt the economy are the reactions of individuals.” People are likely to take more precautions to protect themselves from the virus, including socializing less.

Although the rules are relatively light, for some companies it will be an unwelcome retirement.

Before the discovery of the Omicron variant, the UK economy was losing momentum as prices rose rapidly, putting inflation at its highest level in nearly a decade. Gross domestic product rose 1.3% in the third quarter, compared to 5.5% in the previous three months. And that growth has been driven by spending on services, particularly in hotels, restaurants and entertainment, with the last of the major pandemic restrictions being lifted this summer. In October, economic expansion slowed sharply, to just 0.1% from the previous month.

Now, there are early indications that restaurant reservations are down and the Christmas parties are being canceled.

Restaurants, cafes, and stores serving primarily office workers were facing the loss of the hybrid labor trade, but had at least seen a noticeable return of workers. Some 70 percent of UK workers said they went to work at least a few days a week in early December, according to the Office for National Statistics, up from around 50 percent earlier in the year when the country was subject to strict lockdown.

Sales of Pret A Manger, the coffee and sandwich chain whose stores tend to cluster around office centers and transportation locations, only returned to pre-pandemic levels about two weeks ago. Now those sales are starting to drop again.

“Christmas has been called off for many of the city’s shops, restaurants, pubs and other businesses that depend on worker footfall in nearby offices,” said Catherine McGuinness, policy chairman of the City of London Corporation, who governs the financial district of the capital, in a statement. declaration.

Her organization will encourage workers and businesses to follow the new rules, but said the government needs to establish a roadmap to lift restrictions again in the new year, McGuinness said.

The new measures will also complicate next steps for the Bank of England. Central bank policymakers had prepared to raise interest rates in response to inflation, provided unemployment remains low. Some analysts thought an increase could come as early as next week. But Omicron’s potential to further slow the economy makes it more difficult to justify a tightening of monetary policy.

The additional uncertainty could dampen productivity and employment growth, Mortimer-Lee said. This will likely make businesses more cautious about hiring and investing, especially businesses that rely on face-to-face interactions, like restaurants. In addition, a high number of cases will prevent children from going to school and parents from their work.

“It is these millions of individual decisions, rather than Boris Johnson’s decision, that are going to affect the economy,” Mortimer-Lee said. “And none of it will be good.”

Even before the latest measures, hotels were seeing around a fifth of their corporate reservations canceled, according to UKHospitality, an industry lobby group, after the government asked travelers in Britain to take a Covid test in the two days following their arrival, and to isolate themselves until receiving the results. Christmas bookings weren’t as strong as they traditionally are for hotel companies in a quarter that typically generates around 40 percent of the industry’s annual revenue.

And so, the industry is asking for trade rate relief (a kind of commercial property tax), more subsidies, rent protection and an extension of VAT reductions, a sales tax. “Anything less would be catastrophic,” Kate Nicholls, general manager of UKHospitality, said in a statement.

The latest measures were particularly disappointing for nightclubs, one of the last businesses allowed to reopen earlier this year. The Night Time Industries Association said the Covid passes have been damaging their industry in areas of Britain where they are already in place.

Michael Kill, the lobby group’s chief executive, said businesses have been experiencing a “honeymoon period” since reopening in the summer and trying to replenish cash reserves before the quieter months of the start of the year. .

“We are now seeing some concern about cancellations and reluctance to purchase tickets,” Kill said. “Those kinds of things that leave people in a vulnerable position because a lot of them have been stockpiling, buying and staffing for a busy Christmas season.”

The group accused the government of enacting the changes to distract from public fury over accusations that the prime minister’s staff broke lockdown rules by hosting an office party last Christmas.

“It feels like nightclubs and bars have been thrown under the bus by the Prime Minister to save his skin,” Kill said in a statement Wednesday.

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