This week’s Autumn Budget delivered some mixed news for the hospitality industry.
Chancellor Rishi Sunak announced that the Government will cut business rates in half for the retail, leisure and hospitality sectors (up to £110k), as well as introducing alcohol duty reforms with the promise of a more simplified system delivering future savings.
This news is undoubtedly positive for the industry and our sector’s recovery and these new measures clearly demonstrate that the Government has recognised the important role that the hospitality sector plays in aiding the nation’s recovery.
However, while these future reforms will help many businesses, with no reference to extending the current reduced VAT rate for hospitality, and with increasing wage and national insurance costs as well as rising food, drink and utility prices, the significant cost increases are going to remain an ongoing challenge.
We asked Regency Purchasing Group, Managing Director, Alex Demetriou for his thoughts following the announcement. Here's what Alex said:
“Overall, the budget should be seen as positive, particularly for smaller, independent businesses. However, it's disappointing that the measures do not go far enough to support the entire industry".
The most welcome news is the 50% cut in business rates; every independent business owner knows that this tax needs reform, so it feels as though the Chancellor has bought himself some time in finding a solution. Yet the cap of £110k is going to offer very little support to multi-site operators and larger hospitality groups who are still going through troubled times, particularly businesses in city centres which are taking longer to recover."
“The reform of alcohol duty is also good news. As the Chancellor eluded to, the current system is outdated. Simplifying the current 15 main rates to only six rates and basing the rate on alcoholic strength as opposed to the volume of finished product, is definitely the right decision and this is great news for wet-led pubs, bars and restaurants.”
“The draught relief, which will cut duty by 5% on draft beer and ciders over 40 litres, will create a tax differential between pubs and the supermarkets. While this measure demonstrates that the Government have considered the needs of the sector, it would have been far more beneficial if the applicable container size was 20 litres as many smaller, craft producers supply their beer in smaller kegs. Plus, we will be waiting until 2023 for these changes to take effect, which will feel like a long wait for many businesses.”
“The National Living Wage increasing by 6.6% may not have been what business owners wanted to hear, but arguably the savings in business rates will help to fund this – and we all want to be able to pay our staff more!”
“While we were hoping for an extension to the temporary reduced rate of VAT, the 12.5% rate will remain until April 2022, so this is likely to be addressed in the March 2022 budget.”
“We will continue to do all we can to support this campaign to make the current VAT rate permanent in the hope that we can influence a change in approach before the rate returns to 20% next year.”