Hospitality firms toast VAT cut and discounts for diners
PUB, restaurant and tourism chiefs have toasted a huge VAT cut and £500m dining discount scheme to save their industries from collapse.
Chancellor Rishi Sunak slashed VAT from 20pc to 5pc for hospitality and tourism firms as part of an effort to put a rocket under demand and save summer trading. The reduction will apply from July 15 until January 12 2021.
The former Goldman Sachs banker also unveiled an unprecedented “eat out to help out” discount scheme, which will allow participating restaurants to offer half-price meals throughout August, with the Exchequer covering the discount.
But while some bosses welcomed the Chancellor’s £4bn catalyst for the hospitality industry, others were left thirsty for more. Nick Mackenzie, at pub chain Greene King, said: “The new eating-out discount will be a great encouragement for customers to support the nation’s pubs at this vital time.
“While the cut to VAT on food is great news for the hospitality sector, it’s disappointing that it doesn’t extend to beer.”
Wetherspoon chairman Tim Martin hailed the interim measure as a victory following his firm’s campaign for tax equality between hospitality companies and supermarkets, which charge no VAT on food. He said: “The Chancellor’s initiatives go a long way to recognising this inequality, albeit on a short-term basis. Hopefully this will become a long-term change.”
Former Conservative frontbencher Sir Patrick McLoughlin, who is now chairman of the British Tourist Authority, said: “This is a shot in the arm at a very vital time.”
The Food and Drink Federation said it was extremely appreciative of government cuts to support the sector.
But the trade body’s chief executive Ian Wright warned that even more help could yet be needed to save millions of workers’ jobs. He said: “If demand does not return quickly, these firms will continue to struggle unless they – and the sector they supply – receive additional employment support.
“The Chancellor must therefore keep the option of extending full furlough support to hospitality and their food and drink suppliers in his back pocket.”
Any extension to the taxpayerbacked furlough programme has been all but ruled out by Mr Sunak, who warned there was a risk it could support workers long after their jobs cease to be viable.
There are also questions over whether customers are ready to return to their old habits after aggressive public health warnings to stay at home.
A survey by RBC Capital Markets last week found fewer than one fifth of people would be heading back to the pub immediately.
Veteran stock picker Richard Buxton, of Jupiter Asset Management, said: “Questions remain over whether such giveaways … will be sufficient to entice a still-wary public back into the country’s pubs, restaurants and attractions.”
Kate Nicholls, of trade body UKHospitality, said: “It is good to see that the 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.”
Ms Nicholls also warned that the end of interim restrictions preventing property landlords from winding up businesses over non-payment of rent could hit the industry.
She said: “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.”