Chancellor Rishi Sunak today outlined economic measures to help the hospitality industry as it recovers from the coronavirus lockdown.
He unveiled a 50% discount for diners to boost demand at restaurants, and he has lowered VAT for the hospitality and tourism sectors from 20% to 5% for the next six months, including food and non-alcoholic drinks.
Commenting on today’s announcement, UKHospitality Chief Executive Kate Nicholls said:
“It is reassuring that the Chancellor singled out hospitality and tourism as a vital part of the UKs economy and a pillar of social life around the UK. It is also good to see that Government acknowledges that our sector has been uniquely hit by this pandemic.
“Customer confidence is key to our sector’s revival and our ability to help Britain’s economic recovery. Applying every precaution to provide safe venues will count for nothing if customers are not coming through our doors. This significant VAT cut, heightened ability to retain staff and incentives for consumers to eat out together amount to a huge bonus. We hope that the UK public rightly sees it as sign that we are ready to welcome them back safely. The future of many businesses and jobs depends on it.
“The measures to support job retention and recruitment are very positive. Even after the reopening of some venues, we estimate that around 1.5 million workers in our sector are still furloughed. With revenues likely to be down for the foreseeable future, the support measures to get workers off furlough and back into work will be greatly appreciated.
“Support to retain our workforce with a retention bonus, kickstart employment and bring on trainees and apprenticeships should also be a huge boost to our sector as we begin our long recovery. Businesses have been closed for months and, with the possibility of a difficult winter ahead, support to create jobs will be vital if hospitality is to play the significant role we hope it will in helping boost the economy.
“This doesn’t mean we are out of the woods, and there are still significant challenges ahead. The biggest of these is the spectre of rent liabilities which many businesses are still facing from their closure period. Rent bills have piled up over the past few months even though venues were closed, and businesses are now facing huge rent debts with prospects for the future still in the balance. We are going to need Government support on this before too long.
“The measures announced today are extremely positive, though, and they should give many businesses in our sector much-needed help to get going again in earnest. We thank the Chancellor for recognising the importance and value of our sector, and for acting so decisively.”
Responding to the Chancellor of the Exchequer’s Summer Economic Update, CAMRA’s Chief Executive Tom Stainer said: “While a six-month cut in VAT for food served in pubs and the ‘Eat Out to Help Out’ voucher scheme in August is welcomed, we are concerned that pubs have been left behind by the Chancellor’s statement, which contained little support for community pubs. It is also disappointing to see no direct support for independent brewers and producers, who will not benefit from a VAT cut that specifically excludes beer and cider.
“CAMRA will continue to campaign for greater support for all pubs – including those that don’t serve food. We are calling for long-term support measures – business rate reform and a tax reduction for draught beer – to encourage people back to the supervised setting of the community pub.
“Lockdown has shown just how valuable our pubs are to local communities and the pivotal role they play in tackling loneliness and social isolation. It is absolutely right that they receive extra support during the difficult months ahead to ensure their continued survival.”
Jon Stevens, tax partner at global legal business DWF, comments on the VAT reduction announced by the Chancellor for the hospitality sector. He said:
“The hospitality sector has long campaigned for a reduced rate of VAT and it is a shame that it has taken the economic damage of COVID-19 to produce a temporary tax cut. However, businesses in the restaurant and hospitality sectors will welcome the reduction in VAT to 5% that will hopefully encourage people to spend money with them while we recover from lockdown.”
The Scottish Licensed Trade Association (SLTA) has welcomed Chancellor Rishi Sunak’s decision to cut VAT on food, accommodation and attractions, from 20% to 5%, from next Wednesday until January 12.
It also welcomes the UK Government’s announcement that everyone can get 50% of meals in participating restaurants across the UK during August, with the discount up to a maximum of £10 for adults and children applying from Monday to Wednesday. The scheme, called “Eat Out to Help Out”, will go some way to helping the hospitality sector get back on its feet, said the SLTA.
Hospitality was one of the first industries to close and is one of the last to reopen. SLTA managing director Colin Wilkinson said: “July 15 will be the kick-start for the majority of the industry in Scotland but we must remember it is estimated that nearly one-third of premises will either not be able to open at all or will not be viable even if they can open.
“While we particularly welcome the reduction in VAT from 20% to 5% – something we have been lobbying for – and agree that much of the Chancellor’s rescue package for the UK economy is good news, from the hospitality sector’s perspective Rishi Sunak needed to do more to help rebuild the industry.
“However, this substantial but temporary reduction in VAT for accommodation and food gives the sector a much-need boost,” he continued. “Experience from Ireland shows that when VAT rates are lowered tax revenue to the Government increase, and research undertaken in the UK indicates this would be reciprocated.
“Extending the commercial rates holiday would have also been a huge relief for the industry and again sector-specific support should have been introduced to assist those in most need.
“The entire industry needs ongoing support for many months, stretching to years if it is to recover to anything like the level it was prior to Covid-19.”
Mr Wilkinson said the Chancellor’s job retention bonus plan to keep furloughed workers in their jobs when the scheme ends in October will benefit the hospitality and tourism industry. But he added: “Overall business costs needed to be further reduced to not only protect the future of Scotland’s pubs and bars, but also the 60,000 jobs these businesses provide.”