How the Chancellor’s Winter Economy Plan will Affect Salons

by eleanor / last updated September 25, 2020

On 24 September, Chancellor Rishi Sunak revealed his new Winter Economy Plan, which comes into effect from 1 November as the Furlough Scheme comes to an end.

“The resurgence of the virus [COVID-19] and the measures we need to take in response poses a threat to this fragile economic recovery… but our primary goal remains unchanged – to support people’s jobs, but the way we achieve that must evolve,” he explained.

What is the Winter Economy Plan?

Due to the continuing impact of the Coronavirus, the planned Budget was cancelled and instead the Chancellor, Rishi Sunak outlined changes to economic measures to help individuals, businesses and the economy, which he calling the Winter Economy Plan.

New Job Support Scheme to launch in November

A new scheme has been announced to support the wages of people in work, giving employers who face depressed winter demand the option of keeping people in jobs on shorter hours rather than making them redundant.

The six-month Job Support Scheme will come into effect from 1 November and will support viable jobs – so employees must be working at least a third of their normal hours and be paid for that work as normal by their employer.

The Government, together with employers, will increase those people’s wages covering two thirds of the pay they have lost by reducing their working hours. The employee will keep their job and anyone who as of yesterday (23 September) is employed is eligible.

The scheme will run until April 2021 and all small-to-medium-sized businesses are eligible to apply, but larger businesses can only do this when their turnover has fallen. Businesses who have not previously used the current furlough scheme, which ends in October, are eligible to apply for the scheme.

Job Retention Bonus Continues

Employers retaining furloughed staff on shorter hours can claim both the Jobs Support Scheme and the Jobs Retention Bonus, and this, the Government says, significantly increases the incentives to bring back previously furloughed employees.

If an employer brings someone back who was furloughed and continues to employ them between November and January, the Government will award a £1,000 bonus for each worker. Employees must earn at least the lower earnings limit for National Insurance (£520 per month) between November and January for employers to be eligible for the pay-out.

Self-Employed Support

For mobile and home-based hairdressers, there is an extension to the Coronavirus Self Employed Income Support Scheme (SEISS), although these are less generous than the previous payments. A first, taxable, grant at the start of November will cover 20% of average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, with a limit of £1,875 in total. The second grant will cover a three-month period from the start of February 2021 until the end of April, but details are yet to be announced.

The End of the Furlough Scheme

The furlough scheme is definitely coming to an end and Sunak said that this was a hard choice, but that it is “fundamentally wrong” to keep people in unviable jobs.

VAT Deferred Payment

Sunak also announced Vat Deferral – a 12-month interest-free payment plan for up to 500K businesses. Businesses who deferred their VAT will no longer have to pay a lump sum at the end of March 2021. They will have the option of splitting it into smaller, interest-free payments over the course of 11 months.

Business Support Loans Now Called Pay as you Grow Scheme

The Pay as You Grow scheme is for businesses that took Government guaranteed loans during the crisis. “Loans can now be extended from six to 10 years, nearly halving the average monthly repayment,” said Sunak. Business owners can also move to interest-only payments or suspend payments if they are “in real trouble” for up to six months. This also won’t affect credit ratings.

Coronavirus Business Interruption Loans will be extended for up to 10 years and there will be a new loan scheme in January with more information to come.

Cancelled VAT Increase for Hospitality and Tourism

Sunak is cancelling the VAT increase for two of the worst sectors affected by the pandemic – hospitality and tourism. VAT was planned to increase from 5% to 20% in January, but for these sectors it will remain at the lower rate of 5% until 31 March 2021.

HJ speaks exclusively to hair and beauty salon consultant Ryan Fox to find out the positives and negatives of the new Winter Economy Plan for salon owners…

What’s Good for the Salon Owner in the Winter Economy Plan?

  • The continuation of the Job Retention Bonus is good news if you have enough work to keep staff members on. You should also be looking at your marketing and communication messages to make sure you are keeping in touch with clients to generate work too.
  • The Pay as you Grow Business Support Loans extension of payments from six years to 10 years will really help salon owners with cash flow in the coming years as the monthly payments will be much more manageable.
  • Similarly, being able to spread the cost of the Lockdown VAT Qtr payment over 11 months will also help.

What’s Bad for the Salon Owner in the Winter Economy Plan?

  • The Job Support Scheme pushes more responsibility to the salon owner to cover the costs of 55% as the Government will only be paying 22% of the wages, making it 77% in all. Owners will have to think long and hard if they can cover this extra cost and afford to keep all their team on.
  • It’s still debt – the changes to the business support loans terms whilst welcome, doesn’t change the fact that it’s still a debt that has to be paid back so will affect profits for years to come.
  • Company directors and some self-employed – the Winter Economy Plan still doesn’t address the issues for many salon owners who do not receive any financial help personally from the Government. Many won’t have either the means or the will left to survive.
  • No sector-specific support – the 5% VAT rate extension to 31 March 2021 only applies to food, accommodation and attractions. This could have been a good opportunity for the Government to look again at cutting VAT for labour intensive service industries such as the Hair and Beauty sector which has long been called for but there were no additional sector specific measures announced.

Ryan Fox’s Final Words and Conclusion:

“On balance, whilst there is some additional help, it’s not really good news for the hair, barbering and beauty sector as there is no specific targeted help. The Job Support Scheme is not going far enough and there is still no help for company directors. It’s going to be a difficult storm to weather, but there are steps you can take. Umbrella’s at the ready everyone.”

Ryan Fox is a Hair & Beauty Consultant who offers practical help to salon owners. For more info visit 


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