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Morning Briefing for pub, restaurant and food wervice operators

Wed 6th Mar 2024 - Sector calls Hunt’s Budget a ‘missed opportunity’
Sector calls Hunt’s Budget a ‘missed opportunity’: The sector has called chancellor Jeremy Hunt’s “cut-and-paste” spring Budget a “missed opportunity” and warned it will lead to job losses and even more business closures. Among the measures sector businesses and trade bodies had been hoping was a reduction in the VAT rate to 12.5% VAT for hospitality. Kate Nicholls, chief executive of UKHospitality, said: “The chancellor missed a real opportunity today to show that he backs hospitality and understands the real pain that operators are enduring. He had a chance to accelerate and unlock hospitality, but instead he has delivered a cut-and-paste Budget, maintaining the status quo which continues to act as a drag on recovery. Over the past year, we have had a Budget for growth and an autumn statement for investment – neither have delivered because they were not correctly targeted. The National Insurance cut earlier this year was intended to boost disposable income to generate growth and didn’t have an impact. A different result can’t be expected this time around. Government needs to take a different approach. It needs to bear down on the never-ending rising costs that are forcing businesses to shut their doors for good – taking away people’s livelihoods and robbing communities of a vital asset. Increases to business rates and jobs taxes in April will only increase bills further and contribute to inflation, as venues will be forced to pass on these costs onto consumers. A lower rate of VAT would have been a bold reform that would drive economic growth, keep prices down and unlock investment in the sector, one that was projected to grow six times faster than the economy as a whole. It would have been good for businesses, the public and the economy. Hospitality is a sector proven to be a catalyst for growth across the entire nation, as the foundation of the everyday economy. When we perform, the entire economy performs. It’s a great shame that the chancellor has not recognised that today.” Sacha Lord, the night time economy adviser for Greater Manchester, said: “The last five years has seen a complete destruction of the hospitality. The lack of support in today’s spring Budget is no surprise and yet is also a devastatingly shocking decision. In this election year, the industry must now stand together as one to continue to press all political parties to pledge greater support for the sector in their manifestos. I, along with countless other industry leaders, urge all parties to come together around the table to discuss a reduction in VAT to bring us in line with our European counterparts. Without support, our hospitality sector will not only become unrecognisable, but the job losses that will follow will be difficult for our economy to withstand without serious implication.” Loungers founder Alex Reilley tweeted: “This current government has to be the most anti-business Tory administration in history.” Michael Kill, chief executive of the Night Time Industries Association, said: “The economic challenges faced by our sector are catastrophic, and following today’s announcement, the lack of support will have a profound impact on this sector for years to come. Even the autumn budget last year, which extended business rates relief, was marred by the government’s use of it to offset increases in the National Living Wage, demonstrating a pattern of giving with one hand and taking with the other.” In announcing an alcohol duty freeze – which was due to end in August but has been extended to February next year – Hunt said this will benefit tens of thousands of pubs, adding: “We value our hospitality industry and are backing the Great British pub.” But the British Institute of Innkeeping (BII) said Hunt’s Budget delivered little for pubs, despite the BII’s calls for a reduction in VAT for pubs at the heart of their communities. “The spring Budget statement this afternoon delivered no support for independent pub businesses in every village, town and high street across the UK,” BII chief executive Steve Alton said. “The freeze on duty until February next year will not help pubs, who have been facing huge inflation in every area of their business, high energy costs, wage rises and reduced footfall from consumers facing their own cost of living crisis. This Budget simply did not deliver to safeguard incredibly successful operators, who are struggling with profitability, whilst being unfairly and disproportionately taxed.” Emma McClarkin, chief executive of the British Beer & Pub Association, said: “It is good news that the Chancellor was able to extend the freeze to beer duty at this Budget and will be welcomed by brewers, pubs and consumers alike and will go some way to keep the price of a pint affordable. However, this April brewers and pubs still face a £450m cliff edge of spiralling wage costs and business rates increases, particularly those pubs that are larger or food led. It is disappointing that the chancellor did not choose to go further with a cut duty, reduce VAT or cap the increase to the business rates multiplier which would have helped mitigate the huge cost of doing business. Pressures on our sector remain acute with margins being squeezed to the point where we fear it is likely that a further 500-600 pubs are likely to close this year on top of the 530 that closed in 2023.” Nik Antona, chairman of the Campaign for Real Ale, said: “The Budget was a missed opportunity to show backing for the Great British pub by significantly cutting tax on draught beer and cider served in pubs. However, freezing alcohol duty until February 2024 will be welcomed by consumer and breweries, helping mitigate an additional hike in costs to be passed on to pubs and pub-goers.” St Austell Brewery chief executive Kevin Georgel said: “As a brewery, we welcome the chancellor’s decision to extend the freeze to beer duty, but this will not see costs cut for our sector. The UK still has one of the highest levels of beer duty in Europe, 12 times higher than Germany. We would therefore like to see the government set out a roadmap to bring current duty down to the European average.” Nuno Teles, managing director at Diageo GB, said: “Cheers to the chancellor for freezing duty and backing both the pub and our homegrown Scotch sector.” A spokesman for Heineken added: “We welcome the freezing of alcohol duties until February 2025. This freeze will help bring out the best in the great British pub. Licensees across the UK now need further help to thrive, in the form of long-term, fundamental reform to the business rates system, which despite recent support, still sees UK pubs overpaying by £400m.” Andrew Crook, president of the National Federation of Fish Fryers, was critical of Hunt lifting the VAT threshold. He said: “While we welcome the reduction in national insurance to help keep more money in consumers’ pockets, we feel this budget falls way short of what was needed for my industry and the whole of hospitality. Very few hospitality businesses trade anywhere near the £85,000 threshold and raising it to £90,000 does nothing to help business who pay all of the tax pass on all of the VAT they collect and provide valuable jobs. I do think this government have run out of ideas and do not listen to what the sector says to them.” Kay Buxton, chief executive of Marble Arch London BID, had been hoping for a removal of the ‘tourist tax’ on international visitors. “Although shopping accounts for 46% of all tourist spending, 54% is spent on hotels, eating out, and visitor attractions, so it is frustrating that the chancellor has again ignored widespread calls from industry experts to remove the tax of spending for international visitors,” she said. “The introduction of taxing tourist spending has damaged the international appeal of the UK for international visitors, so this is another missed opportunity by the chancellor, which would have provided a much-welcomed boost for hospitality and the visitor economy.” Isabelle Shepherd, director at accountancy firm haysmacintyre, said: “Extending the alcohol duty freeze until February 2025 is far short of the level of urgent action needed to help the hospitality sector. Today’s budget will be cold comfort for the sector, which has seen hospitality businesses of all sizes facing a constant battle on multiple fronts since the pandemic. And now, with operating costs at an all-time high, and government support having dropped off post-covid, hospitality has been left out in the cold by the chancellor’s budget.” As expected, the chancellor announced a fresh cut to National Insurance contributions for employees from 6 April, reducing the rate by a further 2p. He went on to say that inflation was 11% when he came to office, and the latest figures show it is now 4%. He added that today’s Office for Budget Responsibility (OBR) forecasts show it falling below 2% in target in two months’ time, nearly a whole year earlier than forecast in his autumn statement.


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