Some measures appear to give a welcome shot of relief to the sector. The Chancellor’s Halloween-week announcement was a bit of a “trick or treat” budget.
We have no doubt that the business rate reduction for smaller operations was very much needed, and will be widely welcomed. Nevertheless we think many people may have seemed to have forgotten that, just a month ago, business rates were increased by 2.4%, which would generate £728m in additional revenue for the Government.
It is unclear about the total value of the business rate reduction for small businesses, announced in this week’s budget, and it would be interesting to see to what extent one counter-balances the other, so the reduction in business rates may not be as beneficial as it seems on face value.
The budget seemed, on face value, to go some way towards assisting smaller retailers and restaurateurs but offered no help for the larger companies. In the current landscape, the larger corporate businesses on the High Street are suffering just as much, if not more, than the smaller ones.
Over the past few years we have seen household names such as Woolworths, BHS and Toys R Us disappear from the High Street, as well as large anchor businesses such as House of Fraser and, more recently Debenhams, closing stores. The issue here is that if the Government does not help these larger businesses, and they continue to fail, the businesses around them will also suffer.
There is no doubt that these anchor tenants are the key to attracting high footfalls in certain High Streets, which support our food and beverage sites across the country, as well as smaller businesses. For some pubs and restaurants on High Streets, the disappearance of Debenhams could prove catastrophic.
While the business rate reduction would undoubtedly be welcomed by smaller operators, the increase of the minimum wage will continue to create challenges. Businesses are already struggling to employ the same number of staff that they used to, resulting in a reduction of staffing levels.
It is very subtle in some businesses, and less so in others. If you look at how McDonalds, for example, has introduced their self-order systems. This is a direct reaction to the increase in minimum wage, and therefore increased business costs. The Government needs to be aware that while the minimum wage can be seen as a good thing, they need to ensure it does not result in leaving lower-skilled people without work as the tasks they performed are carried out by technology moving forward.
On the same day that Chancellor Phillip Hammond delivered his budget, it was reported that more than a third of the UK’s top 100 restaurant groups are now loss-making. Figures from accountancy firm UHY Hacker Young say profits at the top 100 groups fell by 80%, from £194million 12 months ago to just £37million.
Popular dining destinations such as Gaucho, Strada and Prezzo have all shut several of their restaurants in recent months, with other big names such as Jamie’s Italian and Gourmet Burger Kitchen also suffering.
The hospitality industry is the fourth biggest employer in the UK and makes a significant contribution to the nation’s economy, so it would have been nice if the Government had acknowledged this in the budget, which did not go far enough to support the sector.