The hospitality and brewing trades have been crunching the figures and analysing the measures in chancellor Rishi Sunak’s Budget.
In a comprehensive package, the chancellor announced:
- Furlough will be extended until the end of September, although employers will be expected to make a contribution of 10% in July and 20% in August.
- Hospitality businesses will be able to get grants of up to £18,000.
- The 5% reduced rate of VAT in hospitality will be extended until September. There will be an interim rate of 12.5% for the six months after that.
- No increase in income tax, VAT, or national insurance. Increase in personal tax thresholds.
- Planned increase in alcohol duties cancelled.
- There will be a ‘super deduction’ tax break for businesses that invest.
At Summerskills Brewery, Plymouth, David Lewis, better known as Norm, is facing a grim trading situation. “We’ve had nothing in the way of grants in Plymouth since £934 ARG (additional restrictions grant) on 15th December for the November/December lockdown,” he told Beer Today.
“Trade in December 2020 was significantly down (over 65% v 2019) and massively down in January 2021 (95%) and February (89%). PCC (Plymouth City Council) say they are processing the payments and we should hear sometime this week. I am relying on bounce-back loans that I may be unable to repay whilst my landlord is happily taking full rent for the unit and pursuing an invoice for buildings insurance of three times the market rate.”
Norm has a brewer, part-time sales rep, and part-time assistant brewer/driver/handman, all on furlough. “I have just secured a premises licence for the brewery and have got some interesting partnerships and projects in the pipeline. I just feel that we may fall at the final hurdle due to lack of funds.” He’ll wait until the Budget figures have been crunched before getting in touch with the landlord and suppliers contributing to fixed overheads to see how the future looks. A situation similar to that of many brewers, no doubt.
Summerskills is a member of the Society of Indepedent Brewers (SIBA). Its chief executive, James Calder, said most of the measures do 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. “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.
SIBA chief executive, James Calder. Photograph: SIBA
“Breweries and wet-led pubs will not benefit from the VAT cut extension as it does not apply to alcohol. Breweries will still be paying full business rates, VAT, and duty and will not receive specific grant support, and while freezing beer duty is welcome, the chancellor is still intending to increase the tax bill for at least 150 small breweries from next January with ruinous changes to small breweries’ relief, putting jobs and the recovery at risk.”
He said the recovery loan scheme which takes forward CBILS (coronavirus business interruption loan scheme) and bounce-back loans, will benefit breweries and many would take advantage, but they will continue to saddle them with debt. Restart grants of up to £18,000 per hospitality business will help businesses plan, but once again, it doesn’t look like breweries are automatically included.
He thought the ‘super deduction’ policy announcement, giving companies investing in qualifying new plant and machinery assets a 130% super-deduction capital allowance on their tax bills may be beneficial, but detail will be awaited as to which taxes can be offset against.
James said: “Whilst this Budget will likely be celebrated by the broader hospitality sector, it comes as a disappointment to the nation’s struggling small breweries and their supply chain, who have once again been de-prioritised by the chancellor.”
The Campaign for Pubs dubbed the Budget ‘disappointing’ saying it discriminated against the classic community local.
Campaign for Pubs vice-chair, Dawn Hopkins. Photograph: Campaign for Pubs
Vice-chair, Dawn Hokins, a licensee in Norwich, said: “This is a disappointing Budget for pubs when thousands of publicans were hoping that the chancellor and the government would listen and save our world-famous pubs.
“It seems that Rishi Sunak either still doesn’t understand or doesn’t care about the classic community local pub, as he has yet again discriminated against them with a continued food-only VAT cut that funnels millions to the likes of McDonalds and KFC, who don’t need it, but does nothing for wet-led pubs.
“In addition, to ask pubs to pay two-thirds of business rates when many will only just have re-opened, is unfair. Considering that pubs have lost so much trade over the last year, the government shouldn’t be imposing business rates at all until 2022.”
Chair, Paul Crossman, a licensee in York, added: “Further grants are welcome, but the restart grants that have been announced will simply be insufficient to enable most pubs to even cover ongoing fixed costs while closed, let alone enable them to restock and reopen. Even the furlough scheme, while great for our staff, will continue to carry a cost for struggling publicans, as we will continue to have to find NI and pension payments and to cover holiday entitlement in order to protect jobs.
“The offer of more loans will not appeal to businesses who are already extremely worried about escalating debt. This is especially the case for those still facing unreasonable rent demands, which is something the Chancellor failed to address at all, a worry which is compounded by the fact that we were not given the extra full year of business rates relief that we were hoping for.”
Nik Antona, chairman of the Campaign for Real Ale, was disappointed not to see a cut in duty on beer served in pubs and clubs, to compete with supermarket alcohol. But he welcomed a government commitment to review alcohol duties in the coming months.
CAMRA chairman Nik Antona. Photograph: CAMRA
He said: “Reducing tax on beer served in pubs and social clubs would encourage responsible drinking in a supervised, community setting — as well as boosting jobs and local economies, helping consumers, and benefiting pubs and licensees.”
He added: “Cutting VAT as pubs begin to re-open, and reducing it until April next year, means they can now start benefiting from that cut — but CAMRA believes this VAT cut should be extended to alcohol so that traditional locals that don’t serve food can benefit, too.
“The extension of furlough until September and new grants of up to £18,000 are very welcome. However, pubs are unlikely to be able to fully re-open at pre-covid trading levels due to outside space and then table service only indoors restrictions. The beer and pubs sector will need further support over the coming months, over and above new loans, to help them get back on their feet until there is a full and proper re-opening and they can trade at full capacity.”
He also welcomed the business rates holiday, but felt it should be extended for 12 months, rather than just until the end of June.
Emma McClarkin, chief executive of the Beer and Pub Association, welcomed the additional grants, extensions to the job retention scheme, 5% hospitality VAT rate, and business rates holiday. She said it was crucial that the government ensures all pubs benefit from the grants, including those that are part of a group, by removing the current state aid cap.
British Beer & Pub Association chief executive, Emma McClarkin. Photograph: BBPA
She said the extension of the job retention scheme would help save thousands of pub jobs and give the sector time to re-open and rebuild trade before bringing all staff back. But she said it was imperative that the government allowed pubs to operate without restrictions as planned from 21st June.
“Extending the 5% VAT hospitality rate until September and at 12.5% thereafter is most welcome,” she said. “We calculate it is worth £485 million to pubs… However, wet-led pubs will be especially disappointed again that the reduction will not apply to all beverages so they too can benefit from this.”
Emma added: “Having called for a cut in beer duty and being a staunch supporter of the Long Live The Local campaign, 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.
“We now hope the government will use the ongoing Alcohol Duty Review to cut beer duty to support our brewers and pubs, and level the playing field with other brewing nations. The government must support and promote Britain’s extraordinary pub and brewing sector in the way other governments support their domestic industries.”
Chris Jowsey, chief executive of Admiral Taverns, said: “We’re supportive of the measures which the chancellor has announced today, including the extension of furlough and the restart grants. These 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.
‘Wet-led pubs have suffered immensely’
“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. 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.”
Paul Davies, chief executive of Carlsberg Marston’s Brewing Company, said: “We welcome the chancellor’s announcement today, which appears to acknowledge many of the calls made by the brewing and hospitality industries over the past year in response to the ongoing devastating impact of covid-19.
“Confirmation of a freeze in beer duty will help support brewers and pubs on the long road to recovery and, importantly, recognises the vital role that beer and brewing plays in the UK economy, including creating jobs, supporting local communities and our Great British pubs.
“But more will be needed, and ongoing financial support directly targeted at the brewing industry will be essential if our industry is to recover financially from the last 12 months. We also remain hopeful that the government will review beer duty within the Alcohol Duty Review to further support brewers and pubs.”
Longer-term strategy needed
Eileen Wilson, communications director of natural hop extract supplier Totally Natural Solutions, welcomed Chancellor Rishi Sunak’s announcement of a £150 million fund which will help communities take over local businesses which are struggling, including pubs. However, she said the measures don’t go far enough to help the brewing industry and supply chain.
“It is heartening to hear that communities are being given that opportunity to buy-in to their local pub. It is a good initiative that certainly goes some way to helping the pub industry grow back from the grass roots. But I would like to see a little bit more conscious leadership going forward in terms of government initiatives to support the brewing industry.
“In terms of how it is affects us as a business, we are encouraged to see that the supply chain is being supported. Where the government hasn’t necessarily gone to any great lengths is in considering how long that brewing supply chain actually is. It’s all very well that we can get things going again and open pubs but actually we need a longer-term strategy for the next ten years.”
