A new study by YouGov shows that the Government’s plan to raise VAT to 20% in April has been overwhelmingly rejected by the public.
Only 1 in 5 think that VAT should return to 20% with the research also highlighting that nearly three-quarters of the public believe that the government should play a central role in the recovery of the hospitality sector.
The study, commissioned by UKHospitality, also revealed that 92% of respondents had seen their cost of living rise since before the pandemic and two-thirds said that they are cutting back on meals out as a result.
UKHospitality have said that an increase in VAT will only further fuel inflation, which is why hospitality leaders are urging Government to hold the 12.5% VAT rate levied on food, accommodation and tourism – and not raise it to 20% after the March Budget.
It added that maintaining the current rate will enable hospitality businesses to recover and rebuild following the pandemic, amid a crisis of heavy debt and soaring costs. It will support operators to manage what is being described as the industry’s unfolding ‘cliff edge’ in April when, alongside the VAT rise, employment costs are set to increase, higher business rates kick in, and the rent debt enforcement moratorium ends.
According to the industry body, the UK already has one of the highest rates of tax for food and accommodation Europe. In France and Spain, the VAT rate is set at just 10%, and in Germany and Belgium, just 7% and 6% respectively. Keeping VAT in the UK at 12.5%, while still considerably higher than in competitive markets, would ensure the UK becomes a more affordable desirable destination for foreign and domestic tourists.
UKHospitality CEO Kate Nicholls said, “After two extremely challenging years and, with the unfolding cost-of-living crisis, there is now a very strong case for the Government to use the next Budget to deliver the vital support that these surviving and indebted businesses need, to protect jobs and defend the current fragile recovery.
“Holding VAT at 12.5% will provide vital support for thousands of small, local, community businesses. It will protect jobs at a pivotal moment for the recovery.
“This research shows that our guests are feeling the pinch and that is hugely concerning for an industry and its workforce that are reliant on discretionary spending. Extending the existing VAT rate of 12.5% will help hospitality operators to hold down their prices, secure jobs and will help keep a lid on inflation.”
The hospitality sector is ‘an industry in peril’ according to the latest edition of the UKHospitality and CGA Quarterly Tracker, which reveals both Q3 2021 sales and full 12-month figures are nearly half what they were over the same period pre-pandemic.
The data shows a 45% drop in sales for the 12 months to end-September 2021 compared to year to end-September 2019, before Covid-19 struck, and annual sales remain £60bn below 2019’s £132bn annual turnover.
But this year’s Q3 sales show a 73% growth rate compared to the same quarter in 2020, which reflects the benefit of removing restrictions and highlighting that, with the right support, the sector could return to strength and drive economic growth and job creation, says UKHospitlaity.
UKHospitality Chief Executive Kate Nicholls said, “While things are certainly moving in the right direction, recovery remains painfully slow and there are massive gaps between the numbers now and where they were before Covid-19 wreaked its havoc.
“Ours is an industry in peril, and this latest data reflects a sector fighting on all fronts for survival. Since trading restrictions were lifted, operators have been plagued with a labour crisis and supply chain issues, not to mention soaring inflationary costs”.
Nicholls added, “Given all the above, the Government must look at implementing measures to support the industry. The most effective of these would be to rethink the cap on business rates relief and maintain the current lower 12.5% of VAT for the sector after April next year when it is set to return to 20%. If this support isn’t put in place sooner rather than later, then consumers will find themselves paying higher prices, hundreds of hospitality businesses will collapse and thousands of jobs will be lost.”
Latest industry data and metrics:
Exact sales figures for YEAR to September 2021 in £bn: In the 12 months up to the end of September 2021, the hospitality sector saw £73.1bn sales.This compares to £133.6bn sales in the 12 months up to the end of September 2019 a pre-Covid comparison).This represents a drop of -45.3% vs the same 12 month period pre-Covid (£133.6bn)
Q3 sales compared to 2019 (July, August and September): The ‘UKHospitality Tracker for Q3 2021’ provides a view of total turnover/sales for the entire hospitality sector.In Q3 (July – Sept) 2021 the hospitality sector produced revenues of £31.6bn, an increase of 73% vs Q3 2020 (£18.3bn)…BUT a drop of -10.1% vs Q3 2019 (£35.1bn).
Closures: according to the ‘CGA & AlixPartners Market Recovery Monitor’ which tracks venue openings and closures, between March 2020 and September 2021, the Licensed market lost 9,900 sites (net closures, incl. openings & closures) equivalent to a loss of 8.6% of venues. Nightclubs and guest houses were among the worst affected.More information is available.
Job losses and vacancies: UKHospitality estimates that the sector has lost almost 700,000 jobs since March 2020 and is currently seeing 10% vacancy rates, representing a shortage of around 200,000 staff across the UK.
Chief executives of the UK’s best loved pubs, bars, restaurants, cafés, hotels, leisure parks, nightclubs, entertainment venues, and visitor attractions have signed a letter to the Chancellor, ahead of his Budget tomorrow (27th October).
The industry leaders have called for a permanent reduced rate of VAT for hospitality and tourism, to support them to rebuild businesses and play a full part in the nation’s recovery – alongside meaningful support on business rates.
UKHospitality Chief Executive Kate Nicholls said: “Hospitality is a critical component of the UK economy, with the potential to be at the heart of the Government’s plans to Build Back Better. We can support job creation, levelling up and the road to net zero – but we need the Government to come with us on our recovery journey.
“Under current plans, VAT returns to its pre-pandemic level of 20% next April, meaning higher prices for consumers just at the time when they can least afford it. For businesses it will undoubtedly set off an inflationary spiral which will undermine wage growth, hit demand and ultimately threaten jobs.
“It will come at the exact same time as we hit a a cliff-edge of the end of business rates reliefs on outdated valuations – currently hospitality pays 10% of the rates bill for an industry that generates around 3% of GDP. On top of this we’re facing a chronic labour shortage, supply chain issues, cost inflation across the board, and rises in the National Living Wage and National Insurance Contributions.
“Fundamental reforms are therefore crucial to the industry’s survival, a key part of which will be keeping VAT at 12.5% permanently. This will allow us to circumnavigate the monumental challenges we face and enable operators and their teams to concentrate time and resources on what they do best – driving economic growth and serving their communities.
“Longer term, there is no doubt that a return to the higher rate of VAT will prevent the industry playing its full part in the Government’s levelling up agenda and in delivering its commitment to focus on good work, better skills, and higher wages. That is why it’s vital the Chancellor must keep VAT permanently at 12.5% for our sector.”
And with the news today that there will be no reduction in VAT on household energy bills in the autumn budget tomorrow Sue Rathmell, partner at MHA, a leading network of accountancy firms, said she believes this was the right decision but a permanent VAT cut for the travel and hospitality sector is still a much needed move.
“The Treasury made the right call: cutting VAT on energy bills was not the best approach. The recent increase in domestic fuel bills will be best dealt with by targeted subsidies rather than a VAT rate cut, as the government notes. In addition, if the Chancellor had cut VAT on energy, that would have been a bad message to send to the world’s leaders who will soon be arriving in the UK for COP26. We need policies that will reduce energy use not encourage it.
“However, that doesn’t mean VAT should stay as it is. The tourism and hospitality industry ought to get a VAT reduction in the upcoming budget tomorrow. The sector benefitted from a reduction in VAT over the last 15 months but is now seeing that advantage eroded, with the rate of 12.5% imposed from 1 October 2021 and a return to 20% from 1 April 2022. Lower VAT costs for hotels, restaurant and tourist centres encourage people to holiday in their own country instead of going abroad, boosting income across the whole nation and cutting down emissions from air travel.”
The Scottish Hospitality Group (SHG) became the newest and loudest voice for Scotland’s hospitality businesses when it was formed in autumn 2020, like campaigning for the removal of the music ban and running a petition that 23,500 people signed in one month. It supported, campaigned and stood shoulder to shoulder with other trade organisations for the continuation of the rates relief for a further year and to keep VAT at 5%. SHG also put together a survey and presented it to government showing the actual cost of opening and closing – and the losses that businesses were making every week, even with the grants.
Here, spokesperson Stephen Montgomery gives his personal take on the last 17 months.
To say that the last 17 months have been a long road, with twists and turns and potholes would be an understatement. Not just for hospitality, but for our supply chain, and our customers too. Who would have thought that when the UK Prime Minister stood before the tv camera on 20th March 2020, we would be dealing with COVID-19 for so long? I know I certainly didn’t. As the days went by and they turned into weeks, then months, we were then confronted with the realisation that this wasn’t a short-term issue. It is hard to put into words the feelings about what has happened to our beloved sector during this time.
The loss of businesses who have permanently closed their doors whether through bankruptcy or through not being able to see any way through this, and the devastation caused to long standing family businesses amongst many, and some that had only literally been open a short time doesn’t bear thinking about. At this point I must pay a heartfelt tribute to all our staff who have stuck by their employers right the way through the pandemic, which saw us open and close so many times, and not knowing when the next curfew, restriction or lockdown would happen.
From the nonsensical music ban, curfews, and other restrictions put upon us, we have turned our entrepreneurial skills into doing other things, like helping our communities, cooking and delivering food, our chefs working in soup kitchens for the homeless, our staff volunteering to help at covid test centres, delivering shopping to the vulnerable, and although we never seek to be praised, we have always shown that without doubt, we are part of the solution, not the problem.
Monday 9th August will be a memorable date for many, as we have left level zero behind, hopefully for good, and entered a new phase, life after zero. With it will come new challenges, and we still see some mandatory things which we still need to deal with, like the wearing of face coverings, and the challenges that brings with it, as England and Wales drop the need for these in a hospitality setting. We hope that Scotland will move to a more personal choice rather than mandatory in the very near future.
As we look to leave one pandemic behind, we enter another. We face a long uphill battle with regards to staff shortage, recruitment, debt, and the ongoing pingdemic. All of which have a catastrophic impact on a sector already on its knees.
So, what can we do about it?
We need to start and rebuild from the bottom. Dissect the issues around recruitment and staff shortage one by one and realise that things cannot be like they used to be. Hospitality is a fantastic career, and one that can take you all over the world. We need to promote it and bury the myths that surround it such as a low wage, long hours career. We need to revisit our employer’s handbook, revisit policies on the wellbeing of staff, their work/life balance, and make them know that they are respected, well thought of, and a stakeholder of the business.
We need to embrace their thoughts. When you see the advert on TV for the army, you don’t hear them saying that when you join the army you will end up in a war or lying in the ditches waiting on the enemy……no, you see them promote a career, a skill, a trade, and this is exactly what we need to do. Investing time in our staff with training must be a good starting point. Getting into schools to speak to children at a younger age is key.
Showing them the vast array of areas within hospitality other than the thought of kitchen, serve drinks or wait on tables. What about HR, accounts, media, the list goes on. Talking to parents, many of which will have done a spell in hospitality in their younger days. Getting our older people back into hospitality and retraining their skills. These are all things which we need to be looking at. Remember, we are the last show in town. We all must realise that yes, there are the scrupulous employers out there, they are in every sector, not just hospitality, and they need to deal with their issues if we are to move forward.
Debt is a major issue for many SMEs now. The average site is in approx £90k of debt made up from BBLs, HMRC deferred payments and creditors. Many will have a lot more with rent arrears. Only this week, SHG had a meeting with Scottish Government and Scottish Enterprise to discuss how we look to fund short term debt such as HMRC into long term. This is something which needs addressed urgently before many more well-respected businesses fall off the edge of the cliff forever. Banks are already asking for forecasts to readdress business debt, and how it will be funded. Many will return to the days of the bad bank, and many will call up bank debt with businesses having no way to pay, leaving only one option available, selling the asset to repay the debt, and leaving the owner with nothing.
The issues we are facing now, are just as bad if not worse than the last 17 months. To get us through this, we can only do it with the help of both the Scottish Government and the UK Government. Keeping VAT at 5% permanently would be a welcoming start from Westminster, and doing something beneficial for our wet pubs. Scottish Government need to look now at the rates issue for 2022/23, as these will be set on the 2016 tone date, and nobody can afford that, so the answer must be a further 1 or 2 years rates exemption. We do not need to hear the political jargon of “we gave full rates relief England didn’t”. What we need to hear is “let’s talk and discuss this now” rather than scrambling for the fire extinguisher at the last minute again. We still face a long recovery, and we certainly hope that the issues around the deposit return scheme will be put on hold as we try to work through the recovery period.
Planning, Preparation and Execution are key components to our future. Scottish Government really need to set out a plan now for what happens through the winter months and beyond “if” (and we all hope not) there becomes a need for any form of restrictions to be revisited. We cannot leave this to the last minute. Sector specific support will be needed. How this is funded is down to government, but as always SHG will be willing to help work through this and give ideas to the “think tank” just as we have been right the way through this.
In closing I would like to say a big thank you to the many friends I have made in the last 17 months, my fantastic colleagues within SHG, officials and Ministers across all parties within Scottish and UK Governments, and to colleagues within the other trade bodies. We have worked so hard to get to where we are today, but there is still much to do in the next few years ahead
See you all at the Scottish Bar & Pub Awards on 7th September, the first real chance we have all had to get glammed up and socialise together.
Chancellor Rishi Sunak’s set out his plans for economic recovery today in his Budget saying the UK Government will do “Whatever it takes to support people and businesses through this moment of crisis”, and the response from hospitality organisations has been broadly positive. However, although he awarded further start-up grants of up to £18K for English businesses – it will be up to the Scottish Government to decide what they will issue to Scottish businesses with the extra £1.2bn they have been allocated to spend supporting Scottish businesses.
The main Budget points are:
VAT remains at 5% until the end of September and then goes to 12.5%
Furlough has been extended until the end of September with business contributing 10% in July, and 20% in August and September.
A new Recovery Loans Scheme will replace CBILs and Bounce-back loans. It offers £25k – £10m to businesses, with the UK government providing an 80% guarantee to lenders. You can apply until the end of the year.
130% tax relief for those that invest in their businesses
alcohol duty and fuel duty has been frozen
Apprenticeship funding doubled to £3K.
UKHospitality Chief Executive Kate Nicholls said, “The Chancellor has listened to the concerns of the hospitality sector. Details are yet to be pored over but it looks like crucial support will help businesses at a critical time.
“While it would have been better to have extended the 5% rate further, it is now vital that the Government looks at introducing the interim rate for hospitality on a permanent basis. It would be a positive legacy of an otherwise dreadful year for our sector. A permanent reduced rate of VAT for hospitality would redress the unfair tax imbalance that our businesses have faced for too long and make us internationally competitive.”
Marc Crothall, Chief Executive of the Scottish Tourism Alliance, said, “Overall, it’s a supportive budget but it is absolutely vital that businesses who have been hardest hit and will be last to open are given a realistic and supportive timescale to enable sustainable recovery for the sector.
“The extension of furlough until the end of September will be welcomed by businesses across the sector. However, furlough still comes at a cost to business and it will take some time for many businesses to start to trade viably again and meet the most basic costs. I’ve spoken to a number of sectoral associations over the past week who have told me that businesses simply don’t have the cash reserves to get them beyond Easter; it’s therefore crucial that a robust and tapered financial support package is delivered quickly to the businesses who need it the most in addition to the packages of support announced today.
“The STA has campaigned relentlessly along with UKHospitality and other national tourism bodies for a long term reduction in VAT and today’s announcement that the reduced 5% rate of VAT will be extended until the end of September to 12.5% for a further 6 months is good news. The industry had hoped that the 5% rate would have been extended well into 2022 to allow businesses more time to recover and have the breathing space needed to meet the substantial costs of loan repayments and other significant costs which are looming on the horizon; we will continue to make the case for VAT not returning to 20% beyond March next year to stay competitive as a destination.
“The announcement of new recovery loans with 80% guarantee replacing the CIBLS loan will also be of interest and welcomed by some in the sector, but it is the continued grant support that is needed by businesses to be able to off-set fixed costs and help finance the restart of business trading. I know from the conversations I have had with many different types of tourism businesses large and small across all sectors in Scotland, that it is this additional grant support that is needed with utmost urgency to help them restock and restart.
Stephen Gow, general manager of The Chester Hotel in Aberdeen says, “Any form of support for the hospitality industry and the individuals employed across such a diverse sector has to be welcomed.
“The continuation of the VAT reduction to 5% for six months to the end of September is a welcome measure and the proposed staged increase of VAT will be of assistance. An extension of the 5% until at least the end of the year would have given businesses a more stable platform from which to plan operational and financial recovery.
“Extended furlough will allow us, as business returns, to phase the return of our team to the business to meet its needs which will be helpful.
“It’s good to see the Chancellor acknowledging that the hospitality sector has been badly hit and will reopen with more restrictions and we await details on the new Restart grants for English hospitality businesses which the Chancellor has said will be up to £18k. Scottish businesses need this to be echoed in Scotland.”
While Dayalan Nayager, Managing Director, Diageo Great Britain commented, “We thank the Chancellor for providing much-needed stability by freezing alcohol duty. The last year has been incredibly tough and today’s decision, along with other measures to help the trade, gives the industry confidence to meet the ongoing challenges in these critical last months before reopening. Commitments such as Diageo’s £30m, to help pubs and bars operate safely through our Raising the Bar, will give even further assurance. We now look ahead to the Alcohol Duty Review and welcome the opportunity to work with Government to bring greater fairness to the duty system and spirits producers across the UK.”
Emma McClarkin, Chief Executive of British Beer & Pub Association, said, “Overall, this is a good Budget for pubs and breweries in the short term, reflecting just how vital they are to the social, cultural and economic fabric of our communities.
“However, this is just the start of the journey on the hard road to long-term recovery for our sector. The Chancellor has made it clear today he recognises the vital role local pubs play in their communities. Now he must continue that commitment by ensuring Britain’s pubs and breweries are supported in the long term. This should start by extending the VAT cut on hospitality to all drinks until at least the end of the year. We also need a fundamental reform of VAT, business rates and beer duty to ensure that the thousands of pubs and breweries across the UK can thrive and help drive the social and economic recovery we urgently need.”
Hospitality businesses urgently require further Government investment and support so that the sector can fulfil its potential in helping to drive wider economic recovery UKHospitality has warned as part of its evidence to the Treasury Select Committee Inquiry into the Economic Impact of Coronavirus.
It has two clear proposals to drive this growth:
Extend the VAT cut to 5% to for a further 12 months, and ensure it applies across the broad hospitality sector, to stimulate economic activity
Enact a further business rates holiday for hospitality for 2021/22 to protect communities and repair businesses.
Additional measures needed to support businesses, contained within the submission, include:
Implement a reformed Job Retention Bonus to allow continued investment in the workforce
Extend the repayment and interest-free period for all Government-backed loans to 10 year.
Defer tax payments further, to December 2021, to allow full trading before debts to Government fall due.
Extend CJRS until the end of June, allowing flexible furlough
Assist the hospitality supply chain so it can support the sector’s recovery
UKHospitality Chief Executive Kate Nicholls said, “Put simply, hospitality is battling for survival. Our sector has been the hardest hit sector by the pandemic and is staring into the abyss. But if the right conditions and support are put in place, we could be justifiably optimistic of the future role hospitality can play in returning the country to growth and boosting employment.
“The VAT cut and business rates holiday were two key measures that the Government correctly identified in 2020 that would stimulate economic activity and assist businesses. With subsequent lockdowns and restrictions, many in hospitality have been unable to recoup the intended benefits. Extending these measures would act as a critical revival system – saving many jobs and setting up the economy for much need job creation for the rest of the year.”
UKHospitality also highlighted that four in 10 sector businesses stated that they would fail by mid-2021. Only one in five have enough cash flow to survive beyond February under present levels of support with figures from its quarterly sales tracker, in partnership with CGA, showing sales in the sector collapsed by 54% sector resulting in a loss in revenue of £72bn more than 10 times worse than the impact of the 2008 financial crisis for hospitality.
The evidence builds on previous submissions given by UKHospitality to the Treasury Committee and the recent Budget submission to the Treasury.
It is hardly surprising that research is showing that hospitality had the worst festive period in living memory – in fact, 2020 was the worst year ever. (I’m not sure we need research to work that one out!) But as we take stock on last year’s shutdown and the on going one – what is next?
Firstly, the trade organisations are working tirelessly on behalf of the licensed trade – all of the bodies from the Scottish Beer and Pub Association to the Scottish Hospitality Group, UKHospitality and the Scottish Tourism Alliance and SLTA are putting the case to everyone who will listen.
Rates is probably the biggest worry at the moment because if action is not taken by the Scottish Government to extend the Business Rates Holiday for the hospitality industry for another year, businesses across the country will be faced with paying rates based on 2016 figures. This would be enough to tip even the most successful operators over the edge. This needs to be addressed urgently if businesses and jobs are to be saved.
The other issue that operators are coming up against is Bank Covenants – or the potential breaking of them. Banks are requesting business plans to assess risk – but what operator can at this moment in time predict their level of business over the next 12 – 24 months? There should be moratorium on bank covenants for the next 12 months at the very least.
The continuation of the 5% VAT reduction for hospitality would also help. But the VAT reduction without the issue of rates being addressed is immaterial – because for many, many businesses, if rates are not addressed, they won’t be charging VAT because they won’t be in business.
Funding is still not coming fast enough and there will be a reckoning – I understand there are various Freedom of Information requests in to find out what has been paid out. Our First Minister tells us frequently that it has been allocated – I would prefer the term dispersed.
But some councils are certainly not going as fast as others when it comes to giving out the grants. Here’s hoping the vaccine roll-out is smoother than the Scottish grant roll-out.
What seems certain is that the current restrictions and ongoing restrictions are going to last well into the latter half of the year. Will we come out of the tier system this year? No doubt the organisers of the Climate Summit are hoping we will because if we don’t, it will not be going ahead!
Just to remind you
Tier 0 – Hospitality open and licensing times adhered to. Weddings and funerals limited to 50, eight people from three households can socialise inside and 15 from five households can meet outdoors.
Level 1 – Hospitality – Inside last entry 9.30pm closed 10.30pm. The rule of 6 applies, with weddings and funerals limited to 20. Same times for outside.
Level 2 – households can mix in hospitality but not at home. Inside, alcohol only can be served with a main meal. 7pm last entry. Outside, alcohol allowed – 9.30pm last entry, 10.30pm close.
Level 3 – no alcohol inside, 5pm last entry, 6pm closed. Outside, no alcohol.
Level 4 is the closure of all hospitality venues.
There is not likely to be a quick loosening of the tiers, despite the vaccine roll-out. Most people suggest that we may move out of lockdown mid-February if we are lucky. Then into Tier 4 in March – and perhaps by the end of March we may move into Tier 3… if we get lucky then maybe Tier 2 for Easter. But the jury is out on that. It all depends on the figures.
It has been suggested that the UK Government will move quicker. The Scottish Government is always more cautious.
However, the devil is in the detail. Tier 3 with the restrictions on opening hours makes opening not viable for most businesses in this tier. Some businesses can operate without alcohol but it makes no sense financially if they can’t do evening meals.
There has to be some flexibility from ScotGov to help hospitality get back on its feet. If that is trading hours, then it’s something.
But there are other issues not least for suppliers. The Scottish Government is pushing ahead with the Deposit Return Scheme – and wholesalers are having to bear the set-up costs of this scheme which is being imposed on them. We all know that wholesalers are not working on the biggest margins – and every trade business needs wholesalers to keep operating in order to have the supply there when it is needed. So right now, despite its green credentials, it really is not good news. It is due to come into play on 1st of July this year. Perhaps it is time that DRS was put back 12 months.
Remember, licensees will seen an impact cashflow too, with a deposit on all cans and bottles (single use drinks containers) of 20p required before you sell them – yes, you get the cash back, but when?
The only help suppliers have had is a £5m fund launched in December – which was open for only a week. It was targeted a food and drink wholesalers who had seen sales fall by 20% or more since March – most of the hospitality suppliers I know lost upwards of 90%… despite pivoting to sell to consumers.
Chancellor Rishi Sunak will not extend the furlough scheme beyond October but he has announced a Job Retention Bonus scheme which will see employers paid a bonus of £1,000 for every employee they bring back off furlough and employ until January. The hospitality industry will see VAT reduced to 5% for food and accommodation and a new Government Scheme “Eat Out to Help Out” to incentivise customers to eat out is being introduced for August.
He said in his statement, “We can’t protect every job but we can get as many people as possible from furlough back to their jobs. We are introducing a new policy to reward and incentivise employers who bring employees back off furlough with a new jobs retention bonus – if you bring someone back and continuously employ them to January 2021 there will be a £1K bonus per employee.”
With regard to hospitality and tourism, he said, “Our economy relies on consumption especially social consumption. The best jobs programme we can do is restart these sectors and get them bustling again. We need to give these businesses the confidence to know that demand will be there so today I am introducing two new measures to get these sectors moving and protect jobs – VAT on hospitality and tourism will for next six months be cut for food accommodation and attractions to 5% from Wednesday to January 12th.”
He continued, “The final measure has never been tried before in the UK. To get customers back into restaurants cafe and pubs and protect the people that work in them for the month of August we will give everyone in the country an ‘eat out to help out’ discount meal eaten at any participating business. Monday to Wednesday there will be a 50% discount, up to the value of £10 per head, for everyone including children. Businesses will need to register and can do so website open Monday. Each week in August businesses can claim the money back and will get the money back in their accounts in five working days.
He revealed a Kickstart scheme which will pay employees directly to create new jobs for 16-24-year-olds which will see the Government pay their wages for six months as long as they are employed for 25 hours a week and the job is a good quality job. For 24-year old employers would get a grant of £6,500. Employers can employ be part of scheme from next month and they can hire as many people as possible. Said Rushi, “There is no cap on the number of places available.”
The Government will also pay employers £1,000 per trainee they take on as well as, for the next six months, paying employers £2,000 to create new apprenticeships. There is an added incentive of a bonus payment of £1,500 to take on people over the age of 25 years old.
Marc Crothall, Chief Executive of the Scottish Tourism Alliance said, “The series of support measures announced by The Chancellor this afternoon are hugely welcomed by Scotland’s tourism industry and go beyond what we had anticipated in terms of the lowering of VAT to 5%. The STA, along with our counterparts at UK Hospitality have campaigned heavily for years for the UK government to cut VAT to 5%; this represents a huge catalyst for the tourism economy and I know this news will come as a huge relief today for thousands of pubs, restaurants, accommodation providers and visitor attractions across Scotland and their employees whose jobs have been given increased protection.
“The “kick start” scheme to create more jobs for young people is a huge boost for the tourism sector, as indeed is the announcement of support for businesses taking on new apprentices with the under 25s representing such a large proportion of our workforce, however we will continue to push for support for all employed in the tourism sector. Further tailored support for older people within the sector is still required as the stark reality of the unemployment crisis looms large.
“Incentivising the public to support our hospitality industry was one of the recommendations the STA made to the Independent Advisory Group on Economic Recovery and I am pleased to see that this has been included in the raft of support measures announced today for the tourism sector. We must remember that while August marks the start of the school holidays south of the border, Scots are already planning staycations and days out throughout July so we will be pushing for the ‘Eat Out to Help Out’ initiative to be brought forward in alignment with the reopen date of Scotland’s tourism industry on 15th July.”
The Scottish hospitality industry should be feeling put out by this year’s inhospitable budget. Beer duty may have been frozen but the minimum wage has been hiked up by 4.9 per cent.
The new minimum wage, effective from April 19 2019, will be £8.21 – that’s an increase of 4.9% and higher than many in the industry had anticipated.
And there are wider implications for the hotels, such as VAT on unfulfilled supplies, which starts on March 19 2019.
This means hoteliers will require to account for VAT on cancellations (previously cancellation charges and deposits retained from guests were not subject to VAT on the basis that there had been no delivery of service). This will obviously reduce profitability.
Meanwhile The SBPA (Scottish Beer & Pub Association) has welcomed the beer duty freeze as an ‘early Christmas present for Scottish pub-goers and licensees’.
Ahead of the budget, the SBPA warned that the country stood to lose 12% of pubs within the next five years without the Chancellor easing some of the tax burden. Estimates from Britain’s Beer Alliance, produced for the SBPA, showed that if closures continue at the current rate, 561 Scottish pubs will close their doors in the next five years.
The SBPA is now also calling on the Scottish Government to match the support announced for English pubs through business rates relief, which would support 2,415 of Scotland’s community pubs and equate to £11 million per year.
Said Brigid Simmonds, Chief Executive of the Scottish Beer & Pub Association,“Scottish pub-goers and licensees will be toasting the Chancellor following his decision to freeze beer duty. This early Christmas present will save brewers, pubs and pub-goers across the UK £110 million and secure upwards of 3,000 jobs that would have been lost had beer duty gone up
“We are delighted that the Chancellor has listened to our campaign and the seven in 10 people across the country who said they’d like to see beer duty cut or frozen in the Budget. Pubs are so important to their local communities and this is a big step in the right direction for those across the country that are struggling.
“What is important now for Scotland’s pubs is that the Scottish Government now match the business rates relief announced for English pubs yesterday. The new relief will see pubs in England with a RV of under £51k have one-third reduced from their business rates bill. A like-for-like scheme in Scotland would support almost 2500 of Scotland’s smallest, community pubs and be worth £11 million in support.
“With the UK budget showing clear support for pubs, the Cabinet Secretary for Finance must provide, at the very least, the same amount of support to Scotland’s pubs when he announces his budget later in December.”
Charles Ireland, General Manager for Diageo Great Britain, Ireland and France, was upbeat in his response to the budget. He said, “We are delighted to have a Chancellor who wants to help drinkers of Scotch, Gin, and our hard-pressed pubs. Philip Hammond has listened to the industry and his Scottish colleagues, and today has acted to support our world beating spirits industry.”
Wetherspoon chairman Tim Martin (pictured) is calling on pub and restaurant operators to show their support for a UK-wide Tax Equality Day on Thursday September 13.
And he has the backing of leading industry organisations, UK Hospitality and the British Beer and Pub Association (BBPA) who are calling on their members to join in too.
Each of Wetherspoon’s pubs in Scotland will offer customers a 7.5 per cent reduction on all food, soft drinks and hot drinks. Pubs in England, Wales and Northern Ireland will be cutting the price of all food and drink by 7.5 per cent on the day.
Tax Equality day is aimed at highlighting the benefit of a VAT reduction in the hospitality industry.
Prices at Wetherspoon pubs will be reduced for one day only, in order to show the benefits of a VAT cut.
At present all food in pubs is subject to 20 per cent VAT, compared to supermarkets which benefit from a zero VAT rate on the vast majority of food products.
Tim Martin said, “Pubs suffer a huge disadvantage paying about 16 pence in business rates per pint versus about two pence for supermarkets.
“In addition there is a huge VAT inequality and unfairness.
“A reduction in the level of VAT on a long-term basis will create a level playing field and generate growth and jobs in an important and vital industry – especially in beleaguered high streets.
“We’re aiming to make it the busiest day of the entire year in our pubs and would urge other pub and restaurant operators to participate too.”
UK Hospitality Chief Executive Kate Nicholls, said, “Tax Equality Day is a great way to highlight just how hospitality businesses are disproportionately hit by VAT.
“The tax disparity between the hospitality sector and supermarkets is still far too high. Pubs are paying around a third of their turnover in tax compared to a fifth for big supermarkets able to sell alcohol at very cheap prices.
“A cut in the rate of VAT for the hospitality sector can help address this unfairness and allow pubs and bars to invest in their businesses and staff members.
“We hope that everyone will support this year’s Tax Equality Day and send a clear and unequivocal message to the Chancellor to give the sector the VAT cut it deserves.”
And BBPA Chief Executive Brigid Simmonds added: “Cutting the tax burden on pubs should be a top priority for the Government.
“We welcome this Tax Equality Day initiative as a way of reminding customers that our pubs are over-taxed and we need action now to hold down the cost of going out.
“VAT reform is long overdue and beer duty and business rates are disproportionately high for pubs in the UK.”
Nigel Evans MP for Ribble Valley said: “The hospitality campaign to recognise tax equality is a welcome and much anticipated event which now resonates with our national consciousness.
“This year’s Tax Equality Day has a special significance as it could be the final year before it achieves its goal as a result of the tax cutting freedoms which Brexit will endow the government with.”
The Jacques Borel VAT club has released a template letter to encourage restauranteurs and licensees to lobby their local MP over existing VAT rates in the industry. The letter is available on the Jacques Borel website, and was released in response to a number of requests from operators seeking guidance on how to frame their local lobbying.
Borel said: “It is clear that operators want to undertake their own local lobbying so the letter is aimed at guiding them on the issues that should be drawn to the attention of their local MP.”
The letter states: “I write to ask for your support for a cut in VAT from 20% to 5% in restaurants, pubs, bars, and hotels. At the moment, there is a significant disparity between the zero rate of VAT on food and beverage sales in supermarkets and the 20% VAT rate for sales in pubs and restaurants.
“On Wednesday 25th September 2013, the VAT Club Jacques Borel organised Tax Parity Day and on Wednesday 24th September 2014 VAT Club Jacques Borel will be repeating this day of action. Tax Parity Day last year was an outstanding success with some 15,000 outlets joining in to support the campaign to secure a fair and equitable VAT rate for hospitality services in the UK. The pubs and restaurants taking part saw an average increase of 20% in their sales and it proved how popular a VAT cut would be and how it would be benefit the local businesses involved.
“Hospitality services support over two million jobs in the UK and are highly price-sensitive. A reduction in VAT would feed through to lower prices, stimulating demand and creating a significant number of new jobs, particularly for young people seeking their first step on the employment ladder. It would help to sustain local communities and regenerate town centres.
“The difference that currently exists between the VAT treatment of supermarket sales compared to sales of food and beverages in pubs, restaurants and hotels is simply unfair and something has to be done about it.”
The Jacques Borel VAT Club has also produced a QR Code that allows operators to easily download the letter.
Tennent’s owner C&C Group, who also produce Magners, has joined the VAT Club Jacques Borel. It has put its weight behind the campaign to reduce the level of VAT on drink and food in the hospitality sector in the UK from 20% to 5 %.
Paul Bartlett, Director of Corporate Affairs at C &C said, “Pubs and bars are vital to the social and economic fabric of the UK. We believe that it is important for suppliers like us to support the VAT campaign and show that we are standing side by side with licensees.
He continued, “The rate of VAT in Ireland in the sector was reduced in 2011 and we have seen the beneficial effect on the hospitality industry there, safeguarding jobs and neighbourhoods. The UK should follow suit.”
Jacques Borel said: “I’m delighted to welcome C&C as new members to the campaign and look forward to many other high profile companies joining in the coming weeks and months.
“The campaign is gaining great traction within the hospitality industry and with the public too.”
Other members include JD Wetherspoon, Heineken T&R Theakston, Shepherd Neame and Punch.