Uncertain times for Canterbury employers as wage subsidy goes

Monday, 6 July 2020

Prime Minister Jacinda Ardern lays out her 'five-point plan' for economic recovery at the Labour annual conference. First published in 2020.

Canterbury businesses facing the loss of the Government’s Covid-19 wage subsidy in seven weeks say they are looking at an uncertain future.

On Monday, Prime Minister Jacinda Ardern said the subsidy, paid to employers who could prove a 40 per cent drop in revenue, would stop in September.

Nick Inkster, who owns OGB bar in central Christchurch, said the subsidy would be finishing in their quietest month.

OGB Bar proprietor Nick Inkster believes the wage subsidy created a false economy for some businesses.

OGB initially received the wage subsidy for 30 staff, and then 24, but Inkster thought the business would be fine. Some casual staff on work visas had already left to travel, he said.

Hospitality is expected to be hard hit when the wage subsidy ends.

* Coronavirus: Prime Minister does not appear keen to extend wage subsidy past September

Pim Borren, head of both the Rental Vehicle Association and Bus and Coach Association. (File photo)

Inkster said the subsidy had created 'a bit of a false economy', and the Government could not keep supporting businesses that were not viable.

Industry bosses say while they expect more jobs to go, it is too hard to estimate numbers. Almost 18,000 Cantabrians are now taking the jobseekers benefit, up from 13,000 when the country went into lockdown in mid-March.

Amy McLellan-Minty, from Hospitality New Zealand, said with wages as their biggest cost, hospitality businesses would be hit “the hardest and longest of any sector”.

The end of the subsidy would result in some businesses accruing more debt they could not afford to try to keep staff employed, she said.

“The road to recovery doesn't stop in September. It will go well beyond and some operators won't make it through the other side.”

Pim Borren, industry body head for both the Rental Vehicle Association and Bus and Coach Association, called for targeted help for businesses completely reliant on inbound tourism.

Canterbury Employers’ Chamber of Commerce chief executive Leeann Watson. (file photo)

“For those with high capital costs, it’s very hard to know what to do.

“We’d hoped that the wage subsidy might be extended for the few months until the borders are opened back up. It’s very disappointing.”

Coach and bus company Leopard Coachlines has already laid off about 50 staff in Christchurch and the same in Auckland, and has about 11 administration staff between the two cities.

Owner Brent Early said they were receiving the wage subsidy for those staff, but would need to retain them after September to keep the business afloat.

Christchurch hospitality stalwart Max Bremner does not expect he will have to cut more staff. (File photo)

He hoped summer would bring the business jobs like sports and school trips.

Early said they were “almost 100 per cent dependent” on international tourism, and were just “hunkering down and hanging in” until an overseas travel bubble opened.

Bacon Brothers owner Troy Bilbrough is not taking a wage as he battles through the coronavirus downturn. (File photo)

Leeann Watson, chief executive of the Canterbury Employers Chamber of Commerce, said they were getting an increasing number of calls from business owners needing to restructure or downsize.

“We are going to see more people having to make adjustments as the wage subsidy extension ends, but it's hard to say what sort of volume.”

Uncertainty over the future of tourism made it hard for businesses to plan ahead, Watson said.

“People are having to make decisions without a clear idea of what could happen.”

She said while rising unemployment was already affecting the economy as people tightened their belts, the end of the wage subsidy could compound this further.

Max Bremner, whose central Christchurch hospitality businesses include Fat Eddie’s and The Bog, said it was probably better the subsidy was happening sooner rather than later because it gave operators a “false sense of security”.

He has laid off most casual staff and some full-timers when the pandemic hit, and did not think he would need to lose more.

Bremner said the subsidy ending would have a detrimental effect on the hospitality industry, but he did not know to what extent.

Troy Bilbrough, who owns burger joint Bacon Brothers, said after taking the initial wage subsidy they did not qualify for the extension.

He said he was being tighter with all his costs and was not really paying himself except for eating one burger daily. He was not using his casual staff but had managed to keep his full-timers, some with reduced hours.

Bilbrough said he thought the Government should have paid a tiered subsidy, based on a percentage of revenue lost.