Operators, suppliers, and trade bodies across the sector have spoken out against the Chancellor’s Budget, criticising it for not going far enough to support hospitality.
John Webber, head of rating at Colliers, said the failure to freeze the business rates multiplier for the next year will mean businesses are likely to see a 5% increase in business rates bills in April 2024.
He commented: “The Government’s lack of comment on Business Rates in its Budget today is desperately disappointing - with no reassurance that it has engaged with the industry - despite the fact the new 2023 Revaluation list becomes live in two weeks’ time.”
Webber also points out that the Chancellor said nothing about freezing the multiplier next year 2024/25. Although the Chancellor is predicting inflation to be 2.9% by the end of the year, business rates rises are decided on CPI levels at the end of September. These are still likely to be around 5%, meaning retail and hospitality businesses will most likely be seeing a 5% rise in their rates bills in April 2024.
Colliers has been campaigning for business rates reform on the grounds that the current system which provides £28 billion (net) for local authority funding is not fit for purpose, overall penalises the retail and hospitality sectors and deters businesses from expanding and investing.
Although the Chancellor announced today that some local authorities would be able to retain their business rates to decide their use and that there would be reliefs in the new Investment zones, Webber brands these measures as irrelevant.
He added: “Business rates retentions are often a hospital pass - the local authorities are given more authority to spend funds raised - but the amount of money raised never fills the gap between what is raised and what is needed. Sometimes retention can be a real negative to the local authority with the impact of appeals and the risk of losses.”
Nick Mackenzie, CEO of Greene King, welcomed the draught duty relief but said the measure did not go far enough.
He commented: “We are pleased to see that the Chancellor has listened to the pub industry and increased the relief on draught beer, an important step to support the Great British Pub. However, the devil is in the detail, and we are concerned that the extended draught relief will still not mitigate the challenging headwinds UK pubs face.
“Pubs are in desperate need of the Chancellor’s ‘Brexit Pubs Guarantee’ as they are still being hit with higher costs on everything from energy to food. We look forward to seeing more detail on how the Chancellor’s announcements today will unlock barriers to work and investment which can help the pubs and brewing sector tackle our current challenges and be able to contribute to the country’s economic growth.”
Tim Martin, chairman of JD Wetherspoon, welcomed the duty freeze but pointed to the gap in tax on pubs versus supermarkets.
He said: “Any reduction in the tax disparity between pubs and supermarkets is welcome. We have been campaigning for tax equality for a long time. This gesture by the government is a tacit acknowledgement that something needs to be done.”
BrewDog CEO James Watt welcomed the draught duty relief but spoke against the lack of action taken to reduce business and VAT rates and continue energy bill support.
Writing on LinkedIn, he said business rates for hospitality should have been cut in half for the next 12 months, while the sector should receive a VAT holiday for a year.
Watt also called for government-backed loans to support smaller operators, and the continuation of energy support for another six months.
He said: “With two pubs in the UK closing every day, the future of our sector is facing an existential threat. We have only just got the bars open after limping through 15 months of lockdowns before inflation sunk its gnarly teeth into our economy, squeezing the bars and pubs pouring the pints and the hammering wallets of the people drinking them.
“The increase in draught relief is a step in the right direction, but quite frankly it’s small change compared to rampant inflation, escalating production costs and savagely crippling energy bills. Freezing duty on pints is worthless if, like many venues in the UK, you can’t afford to heat your premises.
“The brutal fact is, if we had increased the price of our beer in line with how our energy bills have sky-rocketed, the cost of a pint of Punk IPA would be almost £30.
“From next month, there is much less generous support for businesses’ energy costs, so more pain for the wider sector looks inevitable this year with industry experts estimate that up to 70% of the UK’s hospitality venues could be forced to close.”
Kate Vacovec, CFO at Pizza Hut UK & Europe, commented: ”Today’s Budget confirms what the Chancellor has been trailing over the weekend – support for UK hospitality is running dry.
”There’s merit to some of the initiatives soon to take effect, for example, the extension of some energy support for the industry beyond March was welcomed by our sector. Similarly, the introduction of full expensing to replace the super-deduction will go some way to encouraging investment in the sector – helping our ambitions to continue to supercharge growth in the U.K. However, despite these measures, incentives to invest and create jobs will be undermined by the hike in corporation tax, which will cost businesses £12 billion.
“Critical to boosting our economy is unlocking growth, and hospitality has always been instrumental to this. At Pizza Hut, while we’ve been able to leverage the power of our brand to weather some of these rising costs and protect our franchisees and employees – we know that smaller and independent businesses have struggled to keep up. Ensuring we have additional relief on business and operations costs is imperative for businesses like ours to balance the multiple cost pressures we are facing and ensure UK hospitality continues to plug the money back into the economy, which it so desperately needs.”
Nuno Teles, MD at Diageo GB, similarly criticised the chancellor, saying: “Today’s decision is a hammer blow for pubs, drinkers and for Scotch, a UK homegrown industry supporting tens of thousands of jobs. We urge the Chancellor to reverse this punitive and inflationary tax hike.”
