A look at the what the Chancellor’s Budget means for hospitality

In his budget announcement last week, the Chancellor Rishi Sunak announced a 50 per cent business rates discount for the hospitality, retail, and leisure sectors.

He told the houses of parliament: “I’m announcing today, for one year, a new 50% business rates discount for businesses in the retail, hospitality, and leisure sectors. Pubs, music venues, cinemas, restaurants, hotels, theatres and gyms.”

Eligible businesses will be able to claim a discount on their bills of 50 per cent, up to a maximum of £110,000.

Sunak added: “Apart from the Covid reliefs, this is the biggest single-year cut to business rates in 30 years,” he adds. “We’re unleashing the dynamism and creativity of British businesses with a simpler, fairer, more competitive tax system.”

CODE welcomes the news and feels that the business rate break will provide some well-needed respite from the turbulent 18 months the industry has faced. While the plans will be a huge relief for many smaller independents, the £110,000 cap will not be enough for larger businesses, particularly in London where business rates are so high.

UKHospitality’s chief executive Kate Nicholls is largely positive about the announcement: “We have been lobbying hard for significant reform of the outdated business rates system and therefore very much welcome the Chancellor’s move today.” She does advise caution, however, adding that “the devil will be in the detail, so we look forward to learning to what extent it will benefit businesses.”

She did concede, however, that the cap does sideline larger groups.

“We have a £7bn tax bill due to hit the sector in April coupled with 13 per cent cost price inflation and a second round of wage increases,” she told CODE.

“That bubble of inflationary pressure will burst in the form of higher prices to consumers fuelling inflation and interest rate and debt pressures across the economy.

“The business rate relief while welcome will only help the very smallest businesses in the sector to offset that and excludes many larger city centre hotels or multi-site pub and restaurant businesses.”

The big question now is whether, in the Spring, Sunak will ease pressures for the sector by keeping VAT at 12.5 per cent. Given rents are high and wages going up, it would be a big help. She added: “Despite the multiplier removal, they will struggle to meet those bills and it is imperative that the chancellor retains the 12.5 per cent VAT rate to help stave off business failures and job losses.”

There is optimism to be had. Tim Grant, CEO of the Canteen Collection, a small business with four boutique café-restaurants, said: “Especially where we’ve seen higher rates be applied to developments which now have a slightly slower ramp than predicted.”

But as promising as elements of the announcement are, there is still lots of fragility in the hospitality industry such as increasing operating bills and food costs, as well as a recruitment crisis that doesn’t appear to be disappearing anytime soon. We hope that this latest announcement from the government is a stepping-stone to better things to come for the latter end of 2021 and beyond.

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