Reduced VAT, suspended business rates & extended furlough etc.:

A DAY IN THE LIFE:

We got some ‘mini-apples’ the other week. Advertised as ‘ideal for packed lunches’, they were aggressively bland, leading me to comment, as I am wont to do, that ‘they may be small but at least they taste bad.’

And that raised a few quizzical eyebrows as it’s a jarring statement that doesn’t end the way it’s ‘meant to’ but, if you move on quickly to the next topic, you can layer the confusion quite nicely.

Say that you bought them at the delicate essence, you would take them back but it’s only March and they would taste better if you warm them up but your fridge is on the blink and then, if you can scoot off quickly enough, your discombobulated companion will wonder if you are bonkers or if they are. On to the news:

BUDGET – INTERPRETATION:

Introduction:

• For the facts in brief and for industry and company reaction, see below. Here we consider some of the implications. See premium email.

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HERE

THE BUDGET:

Introduction:

• There’s no getting away from it, yesterday’s Budget was the most important for years and, by and large, it delivered the goods for Hospitality.

• Here we look at a) the facts, b) the reaction and c) our interpretation

The Facts:

• This has been done to death, so we’ll keep it brief. The ‘Big Three’ are at the top.

• One. Furlough extended to end-September with companies providing 10% of the wage bill for pay not worked in July and 20% each in August & September.

• Two. Business rates remain suspended until June. Then they are cut by 2/3 for the nine months to end-March next year subject to a maximum cut of £2m – with reduced levels of support where businesses have been able to trade (Devil in the Detail alert)

• Three. The 5% rate of VAT on food & soft drinks remains in place to end-September. Thereafter, it moves for 6mths to 12.5% till next March & then back to 20%.

• Other points are markedly less material but nonetheless important.

• The National Minimum Wage rises to £8.91 from April.

• There are £5bn worth of ‘restart grants’ to be made available to non-essential shops (up to £6k per unit) and hospitality venues (up to £18k)

• Beer, spirits & wine duties will be frozen & £700m will be spent on sport & the arts.

The reaction:

• UKH says ‘the Chancellor has listened to the concerns of the hospitality sector. Details are yet to be pored over but it looks like crucial support will help businesses at a critical time.’

• It says ‘now it is vital that the Government sticks to its date of June 21st for a full reopening of the sector. Delay would see more businesses fail, more jobs lost and undo much of the good work the Chancellor has done to date.’

• UKH adds ‘a permanent reduced rate of VAT for hospitality would redress the unfair tax imbalance that our businesses have faced for too long and make us internationally competitive.’

• The BBPA says ‘we welcome the Chancellor’s announcement of continued support for the devastated pub sector in the form of additional grants, as well as extensions to the job retention scheme, 5% hospitality VAT rate and business rates holiday.’

• It says ‘extending the 5% VAT hospitality rate until September and at 12.5% thereafter is most welcome. We calculate it is worth £485 million to pubs.’ The BBPA adds ‘a beer duty freeze will be seen as much needed short-term relief for the sector. However, the Chancellor has only partially listened to the 500,000 campaign supporters who signed the petition calling for a cut in beer duty.’

• The BBPA notes ‘this is just the start of the journey on the hard road to long-term recovery for our sector. The Chancellor has made it clear today he recognises the vital role local pubs play in their communities. Now he must continue that commitment by ensuring Britain’s pubs and breweries are supported in the long term.’

• The BII says that the ‘Budget provides key foundations on which the Great British pub can begin to rebuild.’ It says ‘critical to our pubs’ recovery is the ability to trade free of restrictions at the earliest opportunity and no later than the 21st June. Only through full trading over the next 12 months will many of our pubs be able to recover their businesses, after a year of minimal trading which left many pubs deep in debt and teetering on the edge of collapse.’

• BII CEO Steven Alton says ‘I have no doubt that customers will return to their local pubs at the earliest opportunity and once again be given a fantastic hospitality experience. Our members have shown throughout this crisis their commitment to their local communities, and their ability to keep customers and staff safe. They will need all of our support over the coming weeks and months, as we all return to the Great British pub.’

• CEO of Admiral Taverns Chris Jowsey says the measures ‘will provide a vital lifeline for our licensees as we move closer to re-opening but it is crucial that local authorities pay these grants as quickly as possible to ensure that pubs are able to open in good shape.’

• Mark Davies, CEO of Hawthorn, comments ‘while the Budget will provide some much-needed support for pubs until reopening, it falls far short of the measures we were hoping for, particularly on Business Rates and VAT, and this will put some Community Pubs at risk of closure. Also the Budget statement was silent on State Aid and Business Rate reform, which was a disappointment.’

• Michael Saunders, CEO of Bibendum, comments ‘we are pleased that the government has decided to freeze duty on wine and spirits. It’s fantastic to see support from the government especially for pubs, restaurants, hotels and their suppliers in what has been an extremely difficult year for our industry.  Also we pay tribute to the WSTA team for their tireless work on our industry’s behalf in getting our message to Government, benefiting all consumers of wines and spirits.’

• Oakman Inns’ Peter Borg Neal tweets ‘all in all a positive budget for hospitality. Concern remains for those industry colleagues who are badly exposed to rent debt. We also need the VAT cut to be made permanent.’

• Manchester’s Night Time economy advisor Sacha Lord tweets ‘overall, I’m pleased today. Recovery will be slow and steady so the furlough extension is a welcome move and will save thousands of jobs. Business rate and hospitality VAT measures will also be a lifeline too many. Operators will be waking up tomorrow with renewed hope.’

• Loungers’ Alex Reilley tweets that the VAT cut ‘is very welcome’ but adds that ‘business rates after June sounds murky.’ He adds ‘grants are also very welcome but without confirmation of revised (or abolished) State Aid limits we don’t know whether we can claim these grants.’

• Quoted in the Morning Advertiser, Greene King CEO Neil Mackenzie says ‘while the business rates extension will help our tenants and smaller businesses, the £2m cap from the end of June, just nine days after planned full reopening, means larger businesses will be denied millions of pounds in vital relief at a critical time. This makes it more important than ever that the government sticks to the timetable for reopening.’

The disgruntled few:

• See travel below. Within pubs & restaurants, wet-led operators were perhaps a little disappointed.

• Chris Jowsey of Admiral says ‘it remains the case however that community wet-led pubs across the UK have suffered immensely during the pandemic and these grants alone are insufficient to ensure they have a longer term future.’

• He says ‘community pubs receive no benefit from VAT cuts on food alone and will now be expected to pay business rates from the moment restrictions are lifted.  I would urge the Chancellor to’ level up’ and further support pubs by reducing the beer tax we pay, which is 11 times higher than the rate currently paid across Europe.’

• Small Brewers’ organisation SIBA says the chancellor’s promise to spend ‘does nothing for the nation’s struggling independent breweries, who desperately needed direct tax cuts and targeted grant support to help them survive until the economy re-opens.’ It says ‘as a result of today’s announcements more Breweries are now more than likely than ever to close, just as there is light at the end of the tunnel.’

• The Campaign for Pubs has responded to the “disappointing” budget for pubs, saying it ‘is not enough nor properly targeted to save many pubs and discriminates against the classic community local.’ It calls for a VAT cut on all pub sales, including alcoholic drinks.

Interpretation:

• See premium email.

PUBS & RESTAURANTS:

• The limit on contactless card payments will rise to £100 later this year, says the Treasury. This will see the current £45 limit more than doubled.

• Markit reports on the UK Services PMI for February saying that the ‘data indicated that a degree of stability returned to the UK service sector after the sharp downturn in output at the start of 2021.’ It says ‘restrictions on travel, leisure and hospitality due to the national lockdown continued to curtail overall activity, but there were some pockets of growth in technology and business services.’

• The Services PMI for the month was 49.5 in February, up from 39.5 in January. Markit says ‘while customer-facing businesses continued to report severe constraints on activity due to the pandemic, there were signs of growth in technology and some business services after a disappointing start to 2021.’

• The Low2NoBev conference planned for 9 and 10 June at The Old Truman Brewery is scheduled to go ahead.

HOTELS & LEISURE TRAVEL:

• ABTA has welcomed certain budget measures, for example, the aid offered to travel companies with retail outlets, but it believes it has not been targeted for help.

• ABTA boss Mark Tanzer says ‘we’re pleased to see the government has responded to many of our calls to extend furlough, business rates relief and VAT reductions. This will help to support jobs and businesses over the coming months.’ He adds ‘however, the chancellor must move beyond the government’s blind spot concerning the impacts of international travel restrictions, and make support available to all travel companies whose business has been effectively closed by public health policy.’

• Tanzer says ‘the chancellor said there are extra grants for struggling businesses, yet many travel companies remain excluded from this critical support, despite not being able to generate income over the last 12 months.’

• Travel Weekly reports Jet2holidays’ as saying that it had seen a 1000% increase in bookings (admittedly over a short time period) since the PM’s roadmap out of lockdown.

• Jet2 CEO Steve Heapy says ‘you’ve probably had people with big percentages to manipulate numbers, but the numbers we put out were true. They have to be because we’re a public limited company.’

• Pontins is to desist from using surnames to screen out would-be customers that it does not want to see visit its sites.

MORE LEISURE SNIPPETS:

• Kantar has told Drinks Business that more UK consumers bought spirits on at least one occasion than they did wine.

• Cadbury has teamed with Goose Island Brewery to create a beer tasting of Creme Eggs. It isn’t April 1st.

• Sainsbury has put 1,150 jobs at risk.

• Carnival-owned Princess Cruises is to offer ex-UK cruises only available to British passengers this summer.

• STR reports US hotel profitability improved slightly in January.

OTHER LEISURE:

• The Entertainment Retailers Association says that a record amount was spent on music, videos and gaming last year in the UK. ERA CEO Kim Bayley comments ‘the entertainment market was already growing without coronavirus, but with much of the leisure sector shuttered due to lockdown, music, video and games were in the right place at the right time.’

• Video sales in particular were strong given the sustained growth of subscription services such as Netflix, Disney+ and Amazon Prime Video. The ERA says spending on gaming was up by 17.7% compared with 2019, while video was up 25.6% and music by 6.8%.

FINANCE & MARKETS:

• More on Budget, sorry. The chancellor says the UK will recover more rapidly than previously calculated. The OBS says the economy should be back to its 2019 size by mid-2022.

• The OBS says the economy will grow by 4%, 7.2%, 1.7%, 1.6% and 1.7% in the years 2021 to 2025 respectively.

• Unemployment will top out at 6.5% not the earlier 11.9%. This is good news but it is partly because the furlough scheme will be continued for longer than envisaged.

• The taxpayer will face a £407bn Covid support bill, with more to come. Borrowing will be £355bn this year and £234bn next. Tax allowances will be frozen for 5yrs and Corporation Tax will rise from 19% to 25% in 2023. More would-be consumers will be pushed into tax and consumption may come under pressure.

• The stamp duty holiday on some properties has been extended to June.

• The NIESR says that it ‘welcomes the extension of Covid-19 support measures’ but adds there was ‘little sign…of the required support through the transition to a post-Covid economy.’ It says ‘there is significant uncertainty regarding the long-term effects of Covid-19 with estimates of long-term scarring between 3-4 per cent. Given the extent of uncertainty, pre-committing to a fiscal tightening could add to the uncertainty and increase the chances of a costly U-turn if some of the downside risks materialize.’

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