Sometimes campaigning pays off: the hospitality industry is hailing a VAT reduction — from 20% to 5% — across food, accommodation and attractions. The cut will last for six months.

Rishi Sunak
Chancellor of the Exchequer Rishi Sunak

There will also be the launch of a voucher scheme to encourage people to eat out in August. “To support restaurants and the people who work in them, we’re saying ‘Eat Out to Help Out’,” Chancellor RishiSunak said today.

“For the month of August we’ll give you a 50% reduction, up to £10 per head, on sit-down meals and non-alcoholic drinks, Monday to Wednesday.”

The Chancellor also announced the Jobs Retention Bonus. Employers who bring someone back who was furloughed — continuously employing them through to January — will be paid a £1,000 bonus per employee.

UKHospitality chief executive, Kate Nicholls, said: “It is reassuring that the Chancellor singled out hospitality and tourism as a vital part of the UK’s economy and a pillar of social life around the UK. It is also good to see that 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 sign that we are ready to welcome them back safely. The future of many businesses and jobs depends on it.”

‘CAMRA will continue to campaign for greater support for all pubs’

However, Tom Stainer, chief executive of the Campaign for Real Ale (CAMRA), said: “While a six-month cut in VAT for food served in pubs and the Eat Out to Help Out voucher scheme in August is welcomed, we are concerned that pubs have been left behind by the Chancellor’s statement, which contained little support for community pubs. 

“It is also disappointing to see no direct support for independent brewers and producers, who will not benefit from a VAT cut that specifically excludes beer and cider. 

“CAMRA will continue to campaign for greater support for all pubs, including those that don’t serve food. We are calling for long-term support measures — business rate reform and a tax reduction for draught beer — to encourage people back to the supervised setting of the community pub. 

“Lockdown has shown just how valuable our pubs are to local communities and the pivotal role they play in tackling loneliness and social isolation. It is absolutely right that they receive extra support during the difficult months ahead to ensure their continued survival.”

‘The pub and brewing sector needs to be thriving, not just surviving’

The British Beer & Pub Association warmly welcomed Rishi Sunak’s positive package of support as a helpful first step on a long road to recovery, especially for food-led pubs and those with accommodation.

However, it has highlighted that further support will be required to help the thousands of community pubs and more than 2,000 UK breweries get back on their feet.

The trade association also welcomed the announcement of the kickstart job scheme, for young people aged between 16 and 24 on Universal Credit, subsidising the costs of work placements for them in businesses. Pubs already directly employ 600,000 people and 43% of them are under 25, making them a vital source of jobs for young people.

Chief executive, Emma McClarkin, said: “The pub and brewing sector has huge potential to create thousands of new jobs and employ more people, but to do this it needs to be thriving, not just surviving. This will require more support in the medium term, directed at all pubs and brewers so they can help lead with the economic recovery.

“These measures include a significant cut to beer duty to bring the UK in line with other European countries who pay far less tax on beer, and a fundamental review of the business rates system so that pubs no longer pay an unfair share of them.

“Such measures will ensure our pubs thrive and continue to bring together people from all walks of life as they have done for centuries. We look forward to these measures being announced in the government’s planned rebuild phase.”

James Calder. chief executive of the Society of Independent Brewers (SIBA), said: “Today’s announcements are a mixed picture. The job retention bonus and kick start scheme will help beer, brewing, and pubs, given we employ a disproportionate number of young people. The temporary VAT cut to 5% and Eat Out to Help Out scheme will help encourage people back into the pub.

“But we’re very disappointed that beer, the UK’s national drink, has been excluded from the VAT cut and the eating out scheme. Today’s announcements do nothing to directly help small, wet-led community pubs and independent craft breweries.”

He added: “Treasury have confirmed with us that the long-awaited announcements on small breweries relief reform and the wider review of alcohol duties have been delayed again, until such a time that the Chancellor and his team can examine the issues in greater detail.

“Given the Covid earthquake that has hit the brewing industry, we need a tax system that does what the Chancellor set out to do for the whole economy: to protect jobs and to enable us to bounce back. The only way that can happen is to reduce the overall tax burden, protect the relief for the smallest breweries, and incentivise growth. We look forward to working with the Chancellor on the future of independent brewing in Britain.”

‘Hospitality trading in the new normal will continue to be highly challenging’

Chris Edger, professor of multi-unit leadership at Birmingham City University’s Business School, believes that while the package unveiled today might tempt back cautious consumers, the industry will be operating in a ‘highly challenging’ environment until the Covid-19 pandemic is fully averted.

He said: “Initial indications from food and drink hospitality units that opened on the weekend are that food sales were trending at 50% down year-on-year and drinks at 20%. Why? Consumer caution and constrained capacity.

“The Chancellor’s moves are designed to optimise capacity on ‘shoulder trading days’, Monday to Wednesday. The voucher scheme will incentivise cautious consumers to get back into the habit of visiting hospitality in August.

“Overall, Sunak’s package is highly welcome, although hospitality trading in the ‘new normal’ will continue to be highly challenging until the Covid threat is fully averted, give the extreme sociability and ‘high contact’ nature of hospitality.”

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