Industry deflated by Sunak's spring statement
The on-trade has been left deflated following the chancellor’s spring statement.
The on-trade has been left deflated following the chancellor's spring statement, which was delivered to parliament on 23 March.
While Rishi Sunak unveiled the government's new tax plan in a bid to ease the UK's growing cost of living crisis, pubs and bars were frustrated by the silence on VAT.
Much of the industry had been hoping for the government to maintain the reduced rate of 12.5% on food and soft drinks, particularly because of the growing momentum of the sector's #VATsEnough campaign.
"This is a real setback for thousands of UK hospitality businesses still suffering the devastating effects of Covid, and facing a tidal wave of rising costs," says Kate Nicholls, CEO of UKHospitality. "For many businesses, the removal of the lifeline of a lower rate of VAT might prove fatal. For a heavily, disproportionately taxed sector a return to 20% dashes the hopes that many businesses could begin to recoup some of the losses of the last two years."
Aiming to boost business productivity
In his address, what Sunak did announced was plans to boost business investment, innovation and growth across the UK.
He has increased the government's employment allowance – a relief that allows smaller businesses to reduce their national insurance contributions (NICs) bills each year – from £4,000 to £5,000 as part of the strategy. He says the cut is worth up to £1,000 for half a million smaller businesses, starting on 6 April.
The chancellor said he will examine how the tax system, including the Apprenticeship Levy, can be used to encourage employers to invest in adult training, with the UK currently spending half the European average on employee training.
"The increase in the NIC threshold for employees is a very positive move and will boost disposable income, although extending that measure to employers would help hospitality businesses to recruit and retain talent," says Nicholls.
Sunak confirmed a 50% business rates relief for eligible hospitality, leisure and retail properties with a cap of £110,000 per company, also coming in this April.
More reaction
Chris Jowsey, CEO of Admiral Taverns, was quick to voice his frustration, saying: "I’m disappointed the chancellor has not announced any new support measures for the pub and brewing industries, which together contribute £26.2bn to the UK economy each year.
"Industry trading volumes have not yet returned to pre-pandemic levels and it's vital that the government continue to invest in the sector at this critical juncture as support measures come to an end. Our licensees worked incredibly hard to sustain community pubs throughout the pandemic and yet their businesses are now being put at risk by further rising costs such as energy and food prices.
"If community pubs up and down the country are to keep their doors open and, in doing so, maintain the jobs of the 936,000 people employed in these industries, I urge the government to consider further support through the immediate introduction of lower beer duty (currently planned for 2023) and much needed reform of business rates."
The British Institute of Innkeeping (BII) has also weighed in, saying it is "hugely disappointed" by Sunak's failure to acknowledge the sector's call for support. The industry body expresses that, while the increased boundaries for NICs will benefit workers and consumers alike, the measures are nowhere near enough to safeguard the future of pubs.
"We have consistently made the case for ongoing investment in our key sector, operating in every community, being at the heart of levelling up across the UK. The lack of ongoing support is a further significant and potentially fatal blow to these businesses," says Steve Alton, CEO of the BII.
"We will continue to work tirelessly with government to secure the longer term support our sector will need to rebuild, and we will do everything we can now to support our members through the incredibly difficult months and years ahead," adds Alton.
The Society of Independent Brewers has also hit out at the government, saying: "Struggling independent brewing businesses need support now, not aspirations for the future."
Wetherspoon chairman Tim Martin has criticised the government's proposal to return to 20% VAT, saying: "It doesn’t make economic sense that food bought in pubs, restaurants and cafes attracts VAT of 20%, when food is VAT-free in supermarkets."
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