New Virus Restrictions in Britain Worry Businesses

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

The night before, Prime Minister Boris Johnson announced stricter Covid measures, and the ramifications were immediate for Darrin Jacobs, the owner of Luc’s. There have been “a large number of rejections,” he said.

But thanks to a waiting list with reservations, the restaurant is fully booked until Christmas. And many of the canceled bookings had optimistically postponed their celebrations until early next year.

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

For months, companies across the UK have been desperate to circumvent supply chain disruptions, labor shortages and rising costs as they emerged from various stages of lockdown.

Reopening of offices that filled commuter buses and trains; Restaurants and pubs advertised to host Christmas parties; and the lines in the cafes in the city center grew longer.

Now the advent of the fast-spreading variant of Omicron has unexpectedly dealt a blow to those efforts. The government has revived coronavirus restrictions that are likely to weigh on the hospitality and travel businesses during the critical holiday season and weigh on the economy.

“I don’t know where this is going next week,” said Mr. Jacobs. “I think this is a tip of the iceberg scenario and it could get a lot worse next week and if that is the case we really need to cut it down.”

At the moment he is still cautiously optimistic. But his business depends on people working in nearby offices and walking to his restaurant on Leadenhall Market, especially several insurance companies. On Thursday, Mr. Jacobs heard that two large companies were closing their offices again.

In England, face masks will be required in most indoor public spaces including cinemas and theaters as of Friday. From Monday, people who can work from home are supposed to be. And from the middle of next week, ID cards with vaccinations or a recently negative Covid test will be required for major events and nightclubs, Johnson announced this week. The rules will be voted on in parliament next week. Scotland, Wales and Northern Ireland have their own, somewhat stricter measures.

“If you don’t go to a total or partial lockdown, the impact of the measures themselves will be rather minor,” said Paul Mortimer-Lee, deputy director of the National Institute of Economic and Social Research in London. “What will harm the economy are the reactions of the individual.” People are likely to take more precautions to protect themselves from the virus, especially by socializing less.

While the rules are relatively loose, this will be an unwelcome retreat for some businesses.

Before the Omicron variant was discovered, the UK economy lost some of its momentum while prices rose rapidly, bringing inflation to its highest level in nearly a decade. The gross domestic product grew in the third quarter by 1.3 percent after 5.5 percent in the three months before. And that growth was driven by spending on services, especially in hotels, restaurants and entertainment, when the last of the major pandemic restrictions were lifted in the summer. In October, economic expansion slowed significantly to just 0.1 percent compared to the previous month.

Updated

Dec. 10, 2021, 8:09 p.m. ET

Now there are the first signs that restaurant reservations are falling and Christmas parties are being canceled.

Restaurants, cafes, and stores primarily serving office workers struggled with the lost trade from hybrid labor, but had at least seen a notable return of workers. About 70 percent of UK workers said they had traveled to work at least a few days a week in early December, according to the Bureau of National Statistics, up from about 50 percent at the beginning of the year when the country was strictly closed.

Sales at Pret A Manger, the coffee and sandwich chain whose stores tend to be grouped around office hubs and transport locations, only returned to prepandemic levels about two weeks ago. Now these sales are starting to slide again.

“Christmas has been canceled for many shops, restaurants, pubs and other businesses in the city that rely on the footfall of workers in nearby offices,” said Catherine McGuinness, political chairman of the City of London Corporation, which runs the financial district of the Capital ruled, in a declaration.

Her organization will encourage workers and businesses to follow the new rules, but said the government needs to create a roadmap for lifting the restrictions in the New Year, Ms. McGuinness said.

The new measures will also make the next steps more difficult for the Bank of England. Central bank policymakers had prepared to hike rates in response to inflation if unemployment remained low. Some analysts believed it could see a surge as early as next week. But Omicron’s potential to slow the economy further makes it harder to justify tightening monetary policy.

According to Mortimer-Lee, the additional uncertainty could dampen productivity and employment growth. This will likely make companies more cautious about hiring and investing, especially companies that rely on face-to-face interactions like restaurants. In addition, high numbers of cases will keep children in schools and parents away from their jobs.

“It’s these millions of individual decisions, not Boris Johnson’s decision, that will affect the economy,” said Mortimer-Lee. “And none of it will be good.”

Even before the latest moves, about a fifth of their business bookings at hotels were canceled after the government asked travelers to the UK to take a Covid test within two days of their arrival and to stay up to date, according to UKHospitality, an industry lobby group Receipt of the results. In a neighborhood that typically ranks around 40 percent of the industry’s annual revenue, Christmas bookings weren’t as heavy as traditionally for hospitality companies.

And so the industry is demanding relief from trade taxes (a kind of trade tax), more subsidies, rental protection and an expansion of VAT reductions, a sales tax. “Anything else would prove disastrous,” UKHospitality executive director Kate Nicholls said in a statement.

Recent moves have been particularly disappointing for nightclubs, one of the last stores to reopen earlier this year. The Night Time Industries Association said Covid Passports had harmed their industry in the parts of the UK where they already existed.

Michael Kill, chairman of the lobby group, said companies had had a “honeymoon period” since reopening in the summer and were trying to build cash reserves before the quieter months earlier in the year.

“We are now seeing some concerns about cancellations and hesitant ticket purchases,” said Mr. Kill. “Those kind of things that put people in a vulnerable position because a lot of them stocked up and bought and staffed their supplies for a busy Christmas season.”

The group accused the government of making the amendments to divert attention from public anger over allegations that the Prime Minister’s staff broke lockdown rules by holding an office party last Christmas.

“It feels like the prime minister has thrown nightclubs and bars under the bus to save his own skin,” Kill said in a statement on Wednesday.