Yahoo Finance Pubs and restaurants left thirsty for more following Sunak's £4bn giveaway
Pub, restaurant and tourism chiefs have toasted a huge VAT cut and £500m dining discount scheme to save their bombed-out 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 in his mini-Budget on Wednesday. The reduction will apply from Jul 15 until Jan 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 from Monday and Wednesday 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, the boss of 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, given the heavy tax burden on brewers.”
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 from the sack.
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 so we do not lose vital jobs and businesses.”
Any extension to the taxpayer-backed furlough programme has been all but ruled out by Mr Sunak, who warned there is 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 a 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 give-aways … 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.
"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 a sign that we are ready to welcome them back safely. The future of many businesses and jobs depends on it.”
With lockdown measures being eased a number of restaurant chains have sought to restructure their businesses. Some have launched company voluntary arrangements - a court-led process to renegotiate rents and close unprofitable sites - while other operators have crashed into administration.
Temporary laws prevent property landlords from winding up businesses over non-payment of rent.
Ms Nicholls warned that the hospitality industry remains at risk once the interim restrictions come to an end.
She said: “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.”
