Scottish Textile News
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China Market Update: Opportunities and Impacts on Consumer Behaviour from COVID-19
Thursday 7th May, 9:30-10:30am
Amid the COVID-19 pandemic, the traditional drivers of China’s economy may be struggling but the country’s consumers keep spending. As one of the first markets globally showing signs of economic recovery, what opportunities can China offer for Scottish consumer companies?
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Economy Secretary Fiona Hyslop has confirmed that grant funding for the newly self-employed suffering hardship and SMEs in distress will be available in the coming days.
The £100 million fund to support the self-employed and SMEs announced last week will be broken into three separate funds as follows:
The recently self-employed, who are excluded from the UK’s scheme but suffering hardship, will be able to receive £2,000 grants. For creative, tourism and hospitality companies of up to 50 employees not receiving business rates relief, there will be rapid access £3,000 hardship grants or larger grants up to £25,000 where it can be demonstrated support is needed. The support and larger grants for pivotal SME enterprises will depend on the specific need of the enterprise and be developed by the relevant enterprise agency with wraparound business advice and support.
The Scottish Government has announced an additional £220 million of support for small businesses and the self-employed.
The new package of measures includes £120 million to extend the Small Business Grant scheme to ensure that, in addition to a 100% grant on the first property, small business rate payers will be eligible to a 75% grant on all subsequent properties.
A further £100 million fund is also being made available to protect self-employed people and viable micro and SME businesses in distress due to COVID. This fund will be channelled through local authorities and enterprise agencies to target newly self-employed people and businesses who are ineligible for other Scottish Government or UK Government schemes.
Textiles Scotland will provide more details as they become available.
Simon Cotton, CEO of Johnstons of Elgin, on the importance of coming together as an industry and relying on your networks to help make difficult decisions during the Coronavirus outbreak.
I run Johnstons of Elgin, which is the United Kingdom’s largest textile employer. We operate manufacturing sites in the North and South of Scotland with both weaving and knitting, and have a fully vertical operation from fibre to finished garment. We employ around one thousand people, manufacturing for the world’s top luxury brands as well as for our own label. I also sit on the board of UKFT and Chair the Scottish Textile Industry Leadership Group.
Running any business is never easy, but this is certainly the most challenging period I have ever experienced in my business career. Just a few weeks ago life was continuing pretty much as normal. Now our whole operation is in its third week of lockdown and almost all of our workers are furloughed or working from home. We have reduced demand, no production, no retail and very few staff still working.
Each decision we took to get to this point felt painfully hard at the time, but looking back seems straight-forward. First we deliberately reduced efficiency through physical changes and creating breaks between shifts. Then we closed our retail operations and sent all retail staff home. Then we closed manufacturing. They were difficult decisions and they were fast decisions, but they were never decisions I made alone. Taking the decisions collectively meant that we considered every aspect before acting. Collective decisions also acted as an excellent check and balance as, at this moment, my views are inevitably coloured by the last news report or social media post I read.
I am fortunate to have an extremely strong management team working with me. Despite that, I reached out to UKFT and I spoke widely with contacts in other businesses. I have sat in on countless video and teleconferences and listened to as many experts as I can. I would urge any textile business owner, however large or small, to rely more heavily than ever on their network and to use organisations like UKFT for expert advice. It will not only help you make better decisions, but it will also help relieve some of the burden of responsibility, which I know rest very heavily when your decisions affect both jobs and lives.
We have found it extremely helpful to consider the current crisis in phases, and we have now passed through the “safer working” phase into the closedown phase. As you all know, there is significant support available from the government, particularly through the Business Interruption Loan Scheme and the Job Retention Scheme. These schemes are superficially excellent, but understanding the detail of exactly how they will apply is very difficult, as the information supplied by the government so far lacks the necessary detail. We are seeing lawyers disagree with other lawyers, as they try to fill in the blanks of how these schemes will operate. No one should be embarrassed about feeling overwhelmed by the confusion which exists. None of us have the information we need to make perfect decisions. We have made the best estimates we can based on the expert advice we have taken, but I am sure some of those interpretations will turn out to be incorrect.
So much is uncertain in this phase, that it is tempting to avoid planning altogether and take each day as it comes. I think that would be a mistake and we have made careful, but unavoidably approximate, cash flow projections based on different scenarios about when we might return and what demand there will be. We also looked at profit and loss but, in this situation, managing cash is far more important and will determine if a company survives or not. Much as we may not want to face up to some of those scenarios, it is crucial that we have looked at them, understood where the critical points are and have a basis for informed discussions with our lenders.
During this phase we are working hard to stay in touch with customers and consumers. There are opportunities in ecommerce but we are being very sensitive about how we approach these. Our social media engagement levels are at record highs and our brand followers have a particular interest in our human stories, about our history and our people. Sometimes those engagements turn into orders but more often, they simply keep our brand connected to those who will form our customer-base when normal life resumes. We also talk to our trade customers as much as we can, despite the fact that there is limited information we can share at the moment. There is also limited information many of them can give to us on their own future demand, as they go through their own challenges.
The next phase will inevitably be to restart operations. We have no idea of knowing when that may be, but we plan to take this also in phases, with a very small core team preparing the ground work for at least two phases of return. As with the close down process, those decisions will be debated extensively but quickly and decisions will be made collectively. This phase presents even more dangers than closing down, as we need everyone to be comfortable that they are returning to a place which is as safe as it can possibly be. If we move too early we risk damaging employee goodwill or making the health crisis worse and we may lose the opportunity the Job Retention Scheme brings to save costs which we may not need. If we move too late we risk letting down customers or losing them.
Following restart we will enter our recovery phase. In this phase we anticipate cancelled and postponed orders, as well as orders which are urgently needed. Good planning and customer relationship management will be critical and production efficiency will suffer, as we push and pull orders to fit our capacity and meet customer needs. It will be a busy time as we all emerge from the enforced idleness of lockdown.
We then face whatever the new normal might be. Although this is largely unknown at the moment, we can already see some of the factors which may come into play. Will we enter a prolonged recession or depression? How will workers who have been working from home for weeks on end want to dress when they come to the office? Will international travel patterns be changed in the mid-term and long-term? Most importantly, how will retailers and brands unwind their stock positions and repair their balance sheets over the next few years.
Into this mix we can add the health and mental health of staff; risk of bad debts; risk to supply chains; currency and raw material volatility and the risks and uncertainty still associated with Brexit. We take comfort in the 223 year history of our company in surviving the Napoleonic wars; the industrial revolution; two world wars; several floods and one major fire. When we look back on this it will make for another colourful chapter in our history book but right now, it is an incredibly fast moving and multi-faceted challenge.
• 2 April 2020
HMRC webinar - Helping employers to support employees
https://email.scotent.co.uk/4X7B-BK6E-3L1150-8SRIT-1/c.aspx
An overview of the support available to help employers and their staff in addressing coronavirus (COVID-19) – including the Coronavirus Job Retention Scheme, refunding eligible Statutory Sick Pay costs, furloughed employees and more.
• 3 April 2020
Financial crisis planning webinar
https://email.scotent.co.uk/4X7B-BK6E-3L1150-8ST0A-1/c.aspx
Business Gateway's financial expert will take you through financial crisis planning.
Essential HR crisis planning webinar
https://email.scotent.co.uk/4X7B-BK6E-3L1150-8SZKX-1/c.aspx
Business Gateway's HR expert will talk you through some areas of consideration for you and your business to not only support your employees but allow you to maintain your workforce.
• (No specific date)
Coronavirus advice for co‑ops
https://www.uk.coop/coronavirus/covid19-webinars?utm_campaign=539366_FindBusinessSupport%20-%20COVID-19%20Updates%2011&utm_medium=email&utm_source=Scottish%20Enterprise&dm_i=4X7B%2CBK6E%2C3L1150%2C1A2Q9%2C1
Co‑operatives UK is hosting a range of webinars in response to common issues arising for co‑ops during the COVID‑19 crisis.
In these challenging times for Scottish fashion and textile businesses, Textiles Scotland, as part of UKFT, is in touch with its international tradeshows and some of the key showrooms to identify which shows will take place, when and where. DIT tradeshow grants are confirmed for shows scheduled to take place in June and early July and we expect to receive the rest of the grant programme for the period running from July to March 2021 very shortly. If shows are postponed we shall ask DIT to carry these events over into the second half of the year and DIT have said that they will work with us on this flexibly.
A number of fashion weeks (i.e the catwalk or runway shows) scheduled in June and July have either announced, or are believed likely to announce, that they may either postpone or reschedule. This does not necessarily mean that the tradeshows and showrooms around them will do the same but we expect to begin to hear the early plans for tradeshows such as Pitti Uomo and the Paris menswear and pre-collections shows as early as mid-April. As soon as we have precise and accurate information, we shall let you know.
In the meantime, a number of showrooms have put details of their collections online for buyers to see, even if they cannot travel. These can be traced via www.modemonline.com which lists most of the key international showrooms, with a link to those which have a virtual showroom campaign. In addition, Playologie (an established platform for predominantly womenswear and childrenswear brands) has offered to extend its established online showroom platform free of charge to up to 300 brands for the foreseeable future at https://www.iloveplaytime.com/hello/playologie/special-announcement/ .
We realise that buyers are being extremely cautious as most stores are closed and many are carrying excessive stock at the moment but, looking to the future and the promise of better times to come, it is important to know which resources are available to help once things begin to go back to some form of normality. Based on the information we are receiving, some brands are still managing to make good sales to their B2C consumers online but many retailers have all but forgotten about collections for spring and early summer, especially anything which needs to be shown in a party environment! On the other hand, we are seeing reports of increased demand online for loungewear and athleisure categories which are very popular at the moment.
Textiles Scotland and UKFT will tell you about any other similar offers we become aware of to help you to build and rebuild your business. We are already working on a regeneration plan to submit to government to support the industry in time for when life begins to return, so that we can help the industry to anticipate and adapt to the new reality when it is here.
Digital Skills Scotland has a portfolio of accredited courses and online resources to suit all your digital needs and helps tackle the digital skills gap. They have secured government funding so you can take advantage of the courses totally free of charge!
Our accredited course, Digital Promotion for Business is designed to help improve peoples understanding of digital marketing and how it plays an important part in business today. It is ideal for people looking to enhance their skill set and offer their employers or potential employers much more, The course will provide learners with essential skills in digital marketing including SEO (Search Engine Optimisation), social media and content writing to name but a few.
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Our online course teaches learners in-demand videography skills. Video is what consumers are spending most of their time online. Very few businesses, like Apple, set trends that consumers follow. More often than not, businesses must go to where the consumers are. Right now, that’s video.
Detailed guidance for businesses on the Coronavirus Job Retention Scheme
The Government has published guidance for businesses and workers on how to access the Coronavirus Job Retention Scheme.
Under the scheme, all UK employers with a PAYE scheme will be able to access support to continue paying part of your employees’ salary for those that would otherwise have been laid off during this crisis.
You will be able to use a portal to claim for 80% of furloughed employees’ (employees on a leave of absence) monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and the 3% minimum automatic enrolment employer pension contributions on that wage. The scheme is expected to be up and running by the end of April.
Who can claim?
Any UK organisation with employees can apply.
You must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.
Employees you can claim for
Furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract.
The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.
To be eligible for the subsidy, when on furlough, an employee can not undertake work for or on behalf of the organisation. This includes providing services or generating revenue.
While on furlough, the employee’s wage will be subject to usual income tax and other deductions.
If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee.
Work out what you can claim
You will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included.
At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month. An employer can also choose to top up an employee’s salary beyond this – but you are not obliged to.
Further guidance will be published shortly on how to calculate claims for Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions.
Employees whose pay varies
If the employee has been employed for a full twelve months prior to the claim, you can claim for the higher of either:
If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.
If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.
Employer National Insurance and Pension Contributions
All employers remain liable for associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on behalf of their furloughed employees.
Top up option
You can choose to provide top-up salary in addition to the grant but you are not obliged to. Employer National Insurance Contributions and automatic enrolment contribution on any additional top-up salary will not be funded through this scheme. Nor will any voluntary automatic enrolment contributions above the minimum mandatory employer contribution of 3% of income.
Employees that have been furloughed
Employees that have been furloughed have the same rights as they did previously. That includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.
Furlough and holiday pay
UKFT will publish details on how to deal with holiday pay very shortly.
What you’ll need to make a claim
To claim, you will need:
You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.
You can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated to 1 March if applicable.
What to do after you’ve claimed
Once HMRC have received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account.
You must pay the employee all the grant you receive for their gross pay, no fees can be charged from the money that is granted.
How to inform your staff
You should discuss with your staff and make any changes to the employment contract by agreement. UKFT aim to issue template letters to help you with this process. When you are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.
To be eligible for the subsidy you should write to their employee confirming that they have been furloughed and keep a record of this communication.
Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme.
You do not need to place all your employees on furlough. However, those employees who you do place on furlough cannot undertake work for you.
The government has published advice for employees on the Coronavirus job retention scheme here.
Moving on and off furlough
Employees must be placed on furlough for a minimum of 3 weeks. You can place employees on furlough more than once and one period can follow straight after another, while the scheme is open. The scheme will be open for at least 3 months.
If your employee is on Statutory Sick Pay
Employees on sick leave or self-isolating should get Statutory Sick Pay but can be furloughed after this.
Employees who are shielding in line with public health guidance can be placed on furlough.
If your employee is on Maternity Leave, contractual adoption pay, paternity pay or shared parental pay
Individuals who are on or plan to take Maternity Leave must take at least 2 weeks off work (4 weeks if they work in a factory or workshop) immediately following the birth of their baby. This is a health and safety requirement. In practice, most women start their Maternity Leave before they give birth.
If your employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply, and they are entitled to claim up to 39 weeks of statutory pay or allowance.
Employees who qualify for SMP, will still be eligible for 90% of their average weekly earnings in the first 6 weeks, followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate (whichever is lower). The statutory flat rate is currently £148.68 a week, rising to £151.20 a week from April 2020.
If you offer enhanced (earnings related) contractual pay to women on Maternity Leave, this is included as wage costs that you can claim through the scheme.
The same principles apply where your employee qualifies for contractual adoption, paternity or shared parental pay.
Further details can be found here.
If Textiles Scotland members have questions or need guidance please do get in touch by emailing jaki@textilescotland.com
Key details of the Self-Employed Income Support Scheme are as follows:
To be eligible you must
The scheme will pay the grant directly to the bank accounts of those eligible for the support. The scheme will run for an initial three months
HMRC is building the mechanism by which the grants will be paid. It is expected that the grants will start to be paid in June.
UKFT will share more detail once it becomes available. In the meantime we would be very interested in hearing your thoughts on the scheme.
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