Operators have welcomed the Energy Bill Relief Scheme while renewing calls for long-term support for the sector.
The scheme, announced by business secretary Jacob Rees-Mogg yesterday (21 September), will run for an initial six-month period and is intended to protect businesses from the energy crisis.
The government has said it will work with suppliers to reduce wholesale energy costs and offer support that will apply to contracts agreed on or after 1 April 2022, and apply to energy usage from 1 October 2022 to 31 March 2023.
Simon Longbottom, CEO, Stonegate Pub Company, told MCA the operator welcomes the support, which will go “some way” towards mitigating sector-wide concerns. He reiterated calls for a reduction in VAT and business rates relief.
“The Prime Minister has referenced the vulnerability of our sector in this economic climate,” he said. “We therefore continue to press Government for a reduced rate of VAT and full business rate relief to further aid our recovery, protect jobs and the livelihoods of our publican partners.”
Chris Jowsey, CEO, Admiral Taverns, said he welcomed the intervention but is hopeful for wider support to be announced on Friday.
“Community pubs are the cornerstone of their communities and whilst we are pleased with this latest intervention, more long-term meaningful support is required which we hope the Chancellor will address on Friday. Reducing VAT for the sector and cancelling business rates for all pubs for the rest of this financial year are vital to ensure our pubs can remain social hubs for their communities.”
Nicolas Burquier, MD for Pizza Hut Europe and Canada, told MCA the scheme is “a step in the right direction” but clarity on long-term support is required.
“There’s only so much we can do before we have to pass those costs onto customers,” he commented. ”While the current proposal from Government will help small businesses to continue operating as we head into the Christmas period, we hope the Chancellor’s statement on Friday will set out a clearer road map from the Government as to what will happen beyond the six-month plan.
”UK hospitality needs to be recognised as a vulnerable sector in need of longer-term support. Only then can hospitality truly plan and ensure it’s there for its customers for many decades to come.
Clive Watson, chairman, City Pub Group, similarly told MCA the scheme’s announcement was “encouraging” for the sector but believes there is a case to be made for wider support. The business is trying to achieve a minimum 10% reduction in energy consumption and it has hedged its contracts for two years from April 2023.
“Any help in these difficult times is clearly very welcome,” he said. “As always, the devil’s in the detail…but I think it’s very encouraging for the sector and UK plc.”
In terms of whether six months is enough, he said that personally he felt it was the right decision.
“Let’s get through winter, let’s come out the other side, let’s see where energy prices are at the beginning of the spring,” he added. “They can’t obviously have a blank cheque on this. But I think six months is the appropriate time and let’s assess it at the end March or hopefully a bit before.”
“I think business rates is a bigger issue and it really needs to be reformed so it’s not a property tax and doesn’t penalise physical retailers, so that online retailers pay they share as well. It doesn’t have to cost the government any money, it’s just shifting the tax to those out of down businesses…so that they pay their fair share. Maybe some kind of sales tax as opposed to a property tax.”
Watson called for a 5% reduction in VAT rates, saying that it would “put money back” into the sector. He said that while paying an extra £40k on electricity per site would hurt the company, its pubs would still be viable, but for other operators that’s not the case.
“I think a VAT cut would put money back into the pocket of hospitality… who have traditionally handed over a lot of money to the exchequer, and I think it would just give those businesses in hospitality sector that lifeline to get through to April.”
Fuller’s CEO Simon Emeny also mentioned reduced VAT and business rates in his reaction to the scheme, alongside clarification of any support following the initial six-month period.
“This is a significant and crucial intervention by the Government and it provides much-needed reassurance over our key trading period,” he said in a statement.
“Again and again, hospitality has shown that it is a real engine for growth – but, with volumes still down from where they were pre-pandemic, I would urge the Government to use the levers of reduced business rates and a VAT cut to further stimulate growth.
“Combined with clarification of further support at the end of the six months, this would ensure we start the New Year in a strong position and ready to deliver positive growth that will benefit the industry and the Chancellor’s coffers.”
Operator sentiments were backed by those of trade bodies, who repeated calls for more comprehensive and long-term support.
UKHospitality CEO Kate Nicholls said the intervention is “unprecedented and extremely appreciated,” adding: “The inclusiveness of the supports announced today – covering businesses small and large – will be extremely beneficial to the sector. A sector that provides a huge number of jobs, many of which are now more secure.
“The Government - and the Prime Minister herself, in her comments in New York yesterday - has singled out the vulnerability that energy costs are inflicting on the hospitality sector. Today’s announcement will give businesses some confidence to plan for immediate survival but we will not relent in our pursuit of a more comprehensive package to safeguard businesses and jobs.
“The levers of reduced VAT and business rates reliefs are still available to the Government, and there must also be a comprehensive package to ensure that there is no cliff edge when these measures fall away.”
The Night Time Industries Association said it welcomed the “long awaited” announcement but highlighted that additional markups imposed by energy suppliers remain uncapped, resulting in small businesses continuing to pay unsustainable energy bills.
CEO Michael Kill commented: “However we remain concerned that this measure to cap the wholesale price to Energy supply companies may not result in sufficient relief being extended to business customers, given that energy suppliers remain free to impose additional mark-ups such as network charges and operating costs, which are uncapped.
He further pointed out the consequences of uncapped pricing over the past few quarters, calling for further support in the budget to be announced this week.
“While we acknowledge that it will take some time for details and final pricing to businesses to become clearer, we also note that this proposal will exclude businesses that renewed before the 1st April where energy costs were still untenable, and does nothing to alleviate the high levels of energy supply debt incurred by businesses exposed to uncapped pricing over the last few quarters, and in isolation is unlikely to be enough to ensure businesses have the financial headroom to survive this winter.”
“If we are to ensure the survival of our sector it remains imperative that the short term relief announced today is extended to 12 months and followed up with further action by the Government in the budget this Friday, and that such action must incorporate our core asks, specifically business rates relief and a reduction in VAT across the board.”
The British Beer and Pub Association similarly said a long-term plan is needed to reduce the tax burden on the sector.
Emma McClarkin, CEO, said: “It is crucial that business owners can easily understand what discount they will be receiving so they can effectively plan ahead, and the requirement for security deposits to enter new contracts must be removed as a barrier to fair supply.
“On Friday, the Chancellor must take steps to address the cost of doing business, by reducing the tax burden on our sector, allowing pubs and brewers the chance to not only survive this winter, but remain at the heart of local economies and their communities for many years to come.”
MCA’s sister title The Morning Advertiser reports that Sacha Lord, night-time economy adviser for Greater Manchester, warned that government intervention may not be enough.
He commented: “I’m pleased the economic importance of pubs and the hospitality sector is finally being recognised and that support is being pledged beyond this initial six-month period. These plans may go some way to staving off the redundancies we have been expecting across the sector.
“However, only time will tell if the Government has gone far enough. Even with this help, businesses will still be paying more than they’re used to, and off the back of the pandemic, the real concern is whether they can aff ord to continue trading even with the support being offered.”
