UK hospitality sector boosted by meal vouchers and VAT cut

The chancellor’s summer statement provided a double boost for the UK hospitality sector, with a cut in consumer spending tax and a discount voucher scheme designed to encourage people to eat out. Rishi Sunak acknowledged that the UK economy rested on “social consumption” as he announced a cut in VAT […]

The chancellor’s summer statement provided a double boost for the UK hospitality sector, with a cut in consumer spending tax and a discount voucher scheme designed to encourage people to eat out.

Rishi Sunak acknowledged that the UK economy rested on “social consumption” as he announced a cut in VAT from 20 per cent to 5 per cent across hotels, restaurants, theme parks, cinemas and other attractions.

Alongside this, he introduced an “eat out to help out” scheme giving consumers a 50 per cent discount on meals eaten in restaurants and cafés between Monday and Wednesday throughout August. Customers can claim up to £10 per person, with businesses able to recover the money from the government.

“This will mean that we are ready set to fire on all cylinders next year,” said Kate Nicholls, chief executive of UKHospitality, which represents the leisure and tourism sectors.

Ms Nicholls added that the measures would have “particular value to the fast-casual eating-out space”, which had experienced the biggest drop-off in trade as customers worked from home during the coronavirus lockdown. She said the scheme would also boost footfall on high streets, which in turn should help retailers.

“It’s the first time I can remember when the hospitality industry has been recognised for the contribution that it makes,” said Simon Emeny, chief executive of the pub chain Fuller’s.

The hospitality sector employs more than 2m people in the UK, and about 80 per cent of them were put on furlough after hotels, restaurants, pubs and attractions were forced to close in late March.

Pub and bar owners face further hardship because the chancellor did not extend the VAT cut and voucher system to alcoholic drinks © Jeff J Mitchell/Getty Images

Although pubs, hotels, restaurants and cinemas were allowed to reopen to consumers last weekend, the majority of businesses that opened reported less than break-even sales as social distancing limited numbers and the public remained fearful of going out.

Pub and bar owners face further hardship because Mr Sunak did not extend the VAT cut and voucher system to alcoholic drinks.

“Bars are really hard-hit because of the fear that we can’t make them safe,” said Sarah Willingham, co-owner of the London Cocktail Club.

Clive Watson, chief executive of City Pub Company, said that the measures “will make not a jot of difference to the city’s wet-led boozers”. He conceded that the VAT cut would help his company, which runs pubs in London and the south and east of England, but that it was “not a shot in the arm” as drinks made up about 70 per cent of sales.

He also warned that the VAT cuts would benefit the industry only if operators passed on the discounts to consumers.

“The success of the scheme will depend on how hard we find it to resist a bargain, and whether businesses can remain profitable given social distancing requirements,” said Sarah Coles, a personal finance analyst at Hargreaves Lansdown, the investment advisers.

Alasdair Murdoch, chief executive of Burger King UK, said that although the efforts to boost consumer spending were “excellent”, the Treasury needed to address the more pressing issue of rent, which makes up one of the sector’s biggest overhead costs.

Few hospitality businesses have paid the rent due for the past two quarters while they have been closed and most are negotiating with their landlords for deferrals or rent cuts.

Mr Murdoch said that, although there was a moratorium on eviction orders until the end of September, landlords had toughened their stance as businesses began to reopen.

“We have gone backwards rather than forwards and until we can reach some kind of accord that is a big jobs risk” as companies would be forced to close sites, Mr Murdoch added.

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