In what is now a well-worn routine, Boris Johnson was last week the bearer of bad news, announcing a much slower than preferred roadmap reopening, with hospitality apparently at the end of the queue.
Somewhat sweetening the bitter pill, Rishi Sunak yesterday came to parliament bring much better news, offering a major package of financial support.
The Chancellor’s Budget was given a broadly supportive, if not exactly emphatic welcome across the sector.
“As good as could be expected in the circumstances” just about summed up the sentiment.
There was a sense that the extended VAT cut, furlough and business rates holiday was the least the Government could do, given they had forced businesses into this impossible situation.
Having a served up an eye-catching platter of financial support, including a £5bn restart grant package of up to £18,000 per venue, the mood was grudgingly grateful - though with major caveats, particularly around state aid limits and the lack of solution on rent.
“I think anything is better than nothing, at least there’s something,” Mitchells & Butlers CEO Phil Urban told MCA.
But he highlighted the lack of sector-specific support, despite the ongoing sector-specific restrictions, as “frustrating” and “unfair on hospitality”.
The business rates holiday looked good, but was not necessarily as helpful for bigger companies with state aid caps still in place, Urban said.
“There’s a real infuriation that time and time again, the bigger companies can’t access it,” he said.
“The irony is not lost on us that we were capped within Europe. Then when we leave, they choose to keep us in the state aid cap. Meanwhile Europe increased their state aid to 10m, or 12m euros.”
The only really positive thing for Urban was the VAT extension, which gives M&B something to plan around.
“It means we don’t have a sudden cliff edge, you’re not suddenly going to see huge price hikes everywhere,” he added.
For Burger King UK CEO Alasdair Murdoch, the Budget was broadly positive, balancing short-term support with the longer-term need to get on top of borrowing.
VAT gives businesses a “good opportunity to start rebuilding our balance sheet”, Murdoch said.
But there was a major piece missing from the Budget, highlighted across the sector. “The challenge lies around rents still, but I am not sure the Budget was going to address that,” Murdoch said.
For Gail’s Bakery backer Luke Johnson it was as “good as could be expected in difficult circumstances”.
“Now they just need to accelerate the opening plan!” he added.
PizzaExpress UK managing director Zoe Bowley said she was “cautiously optimistic” about the coming months and “grateful for the extended support” from the Chancellor.
“Ultimately it’s the return to full trading in all our restaurants that is the best and most viable route forward,” she added.
D&D London chief executive Des Gunewardena was disappointed not to see a full 12-month extension to the VAT cut and business rates holiday, but saw a “solid level of financial support” for the industry ahead of recovery.
The furlough extension was welcome news for workforces, but Gunewardena cautioned that the increased financial contribution required from companies would be a problem for a large number of businesses.
“Overall it is a good budget for restaurants and, combined with some very strong forward bookings for our terraces when we reopen them in April, gives us the first real ray of economic sunshine since the Covid closure of our venues a year ago,” he said.
Byron CEO Simon Wilkinson was sanguine on the key giveaways.
“I am not sure they could or should have done more, especially considering the amount of debt that needs to be paid back over the coming years,” he told MCA.
While noting rent debt was a concern, he questioned whether it was the Government’s role to intervene, when “business common sense should prevail”.
Rent was also a key concern for Comptoir Group CEO Chaker Hanna, who suggested a furlough-type scheme was needed, where the Government pays a percentage of rent during the closure period.
The grants though, were “far from adequate” to plug the cash burn the business was experiencing.
“How this can be fair when it does not differentiate between a small shop in a neighbourhood location versus the vast amount of rent in premium locations in city centres, the West End and the City?” Hanna said.
“In short, the Chancellor has just managed to wallpaper over the cracks,” he added.
James Baer, managing director, Amber Taverns, also noted the restart grants looked good on paper, but until there was clarity on whether they were captured by current state aid limits “we have no idea as to their value”.
“The bottom line is we need to get open and be allowed to trade without being strangled by onerous restrictions,” he added.
Oakman Inns executive chairman Peter Borg-Neal said the measures were less than he hoped for, but still better than expected.
“We would always want more but I do think he [Sunak] has done a good job addressing the challenges and has given good businesses a great chance to recover and return to growth,” he told MCA.
New World Trading Company COO Natasha Waterfield said the extension of furlough while welcome, demonstrated that the “path to recovery for hospitality is unlikely to smooth”.
“The extension allows us to continue to retain our most valuable asset - our people - if the roadmap is delayed. We look forward to re-opening in line with the government planned roadmap,” she added.
Government intervention was still needed on rent however, he said. “It needs to target landlords who are being unreasonable otherwise those who have been supportive, such as Greene King, will lose out whilst the bad guys will get away with it.”
Greene King CEO Nick Mackenzie said the Chancellor had shown “welcome support” for the pub sector in his measures but again said the £2m cap on the rates extension from the end of June would see larger businesses suffer.
“This makes it more important than ever that the government sticks to the timetable for reopening,” he said.
He added that additional grants will also make “little difference” if businesses are unable to access them due to state aid rules, and called for Government to “urgently” clarify whether funds will be affected by state aid.
Describing the measures as “broadly positive”, tampopo managing director David Fox said the devil would be in the detail.
For him, rent was yet again the elephant in the room: “There was nothing mentioned for landlords – many businesses will go bust is most historic rents are claimed.”
Praising the certainty the Budget provides, McMullen’s joint MD Heydon Mizon also urged action from the Government to raise the state aid limit, “and enact it quickly – reducing friction is critical to get this month where is can help businesses starved of cash”.
While opposed to the corporation tax hike, Mizon said the capex deduction looks “very interesting”.
“It’s a knotty challenge but I just can’t wait to be open and focusing on our team and guests, we will make the best of what we have,” he added.
Hawthorn CEO Mark Davies was less optimistic, saying the Budget “falls far short of the measures we were hoping for” particularly on business rates and VAT, which would put community pubs at risk of closure.
“Our priority remains to protect our people and our pubs, and we will continue to work hand-in-hand with our pub partners, helping them apply for grants, and providing our own bespoke support packages to ensure they not only survive lockdown, but Bounce back when they reopen.”
Star Pubs & Bars Managing Director Lawson Mountstevens welcomed the package of support, particularly the grant scheme, which provides a “much-needed lifeline to an industry on its knees”.
“We’ve done all that we can to help our licensees through the pandemic - investing nearly £50m in rent reductions,” he said. “It is good to see the Chancellor step up and provide additional support for pubs who are the beating hearts of their communities the length and breadth of the UK, and we hope today’s announcement paves the way for future alcohol duty and business rates reform to help our sector longer-term.”
St Austell CEO Kevin Georgel praised the Chancellor for recognising the importance of the hospitality and the “vital role” that pubs play in communities.
“We still have a long road ahead of us but after a period of huge uncertainty, and we can now look forward to the future with more clarity and confidence,” he added.
“However, while the measures that have been announced will be a huge help in the short-term, we would urge the Government to keep the health of the hospitality sector under regular review until consumer confidence has been fully restored. This is likely to take time and continued support will be crucial.”
While pleased with the measures, Kerb founder Petra Barran called for broader reform of the business rates system, which she said is “no longer fit for purpose”.
She also highlighted support for the self-employed. “We hope that, with the extension of the self-employed scheme, some of our members who have fallen through the cracks of the previous support measures will be helped but, unfortunately, there are many that still have not been able to access any meaningful support which puts this previously buoyant industry, community and force in massive jeopardy.”
Julia Wilkinson, restaurant director at landlord Shaftesbury, reflected that the budget was positive for the hospitality industry as it faced the recovery stage.
She said measures on furlough, VAT, and business rates would be “particularly welcomed” by Shaftesbury’s estate of smaller independent brands.
Meanwhile she said the restart grants were positive for business revival: “These will be a lifeline for some operators over the next 6-12 months, and also aid the re-opening of cities such as London by helping more businesses to open as people return.”
‘As good as could be expected’ - operators react to the Budget
In what is now a well-worn routine, Boris Johnson was last week the bearer of bad news, announcing a much slower than preferred roadmap reopening, with hospitality apparently at the end of the queue. Somewhat sweetening the bitter pill, Rishi Sunak yesterday came to Parliament with an eye-catching package of much-needed financial support. The Chancellor’s Budget was given a broadly supportive, if not exactly emphatic welcome across the sector, with rent and state aid limits some of the key sticking points. Featuring reaction from M&B, D&D London, Byron, PizzaExpress, Burger King UK and more.