‘Act Quickly and Decisively’ to Save the Sector New Prime Minister Urged

The hospitality sector has reacted to the appointment of Liz Truss as the UK’s new Prime Minister today (5 September), urging her to ‘act quickly and decisively.’

In her first speech, the new Prime Minister promised to tackle rising energy bills. She said: “We need to show that we will deliver over the next two years. I will deliver a bold plan to cut taxes and grow our economy. I will deliver on the energy crisis, dealing with people’s energy bills but also the long-term issues we have on energy supply.”

The government has been warned that hospitality faces “widespread business failures” with tens of thousands of job losses unless it steps in to tackle energy costs.

Hospitality trade bodies today called for support measures including a cut in VAT, a business rates holiday, the deferral of all environmental levies, the reinstatement of a HMRC Time to Pay scheme and the reintroduction of a trade credit insurance scheme for energy to help operators.

Kate Nicholls, CEO of UKHospitality said:
“Congratulations to Liz Truss on her election as the new leader of the Conservative Party and our Prime Minister. We very much look forward to working closely with her and the new Cabinet in the coming weeks, as we strive to save the hospitality industry, which is experiencing crushing cost rises.

“The new Government must act quickly and decisively to address the soaring energy bills that are facing consumers and businesses. With the right package of support – including a reduction in the headline rate of VAT for the sector to 12.5%, a business rates holiday, the deferral of all environmental levies, the reinstatement of a HMRC Time to Pay scheme and the reintroduction of a trade credit insurance scheme for energy – the sector will be well placed to aid growth through generating jobs and local investment.

“Pre-pandemic, our industry spent £10bn a year in high-street regeneration and employed 3.2m people but with energy bills for hospitality businesses rising 300% on average – and as high as 750% in some cases – we desperately need a package of support put in place if we are to be able to play our part in the UK’s economic recovery and growth.”

Brian Perkins, President, Budweiser Brewing Group UK&I comments:
“During this challenging time, with no light at the end of the tunnel for surging energy prices, we need the new Prime Minister to prioritise further support for the hospitality sector. The industry is still recovering from the pandemic and faces a bleak outlook due to soaring energy bills, supply chain challenges and supplier price increases, meaning that pubs across the UK are at risk of closure.

We are committed to supporting the long-term recovery and resilience of the hospitality industry, and are working hard with customers to generate ideas to bring more people back to the pub. We are calling upon the new Government to lower alcohol duty, as consumers in the UK pay up to ten times more beer tax than in Europe, meaning a small cut could balance out price increases of beer to consumers, and help support the beer industry.”

The chairman of the Campaign for Real Ale (CAMRA), Nik Antona, also urged Truss to act fast to avoid many pubs closing for good.

He added: “If pubs increased prices for consumers at the same rate as their energy bills, we would be paying £15 or £20 per pint at the bar – which obviously isn’t viable. Without help reaching them quickly many businesses that survived the pandemic will be forced to close their doors for good with devastating consequences for communities up and down the country.”

Six leading UK hospitality businesses – KFC, Itsu, Just Eat, Pret a Manger, Pizza Hut, Kebab Alliance – have published an open letter in The Telegraph in support of the policy proposal to cut VAT to help hospitality businesses deal with astronomic energy price rises this winter.

News that cutting VAT is one of the measures under consideration for the coming fiscal event (Liz Truss weighs up cuts to income tax and VAT, 28 Aug) is encouraging for high street hospitality businesses.

Reports suggest that a cut could come in the imminent economic package or later, as part of a longer-term review. Either would be welcome – but our experience suggests that decisive, urgent action on VAT is both possible and exceptionally beneficial for businesses facing unprecedented short-term headwinds.

In July 2020 the Government temporarily cut VAT for our sector, mitigating the damage done by the first COVID-19 lockdown. It was a massive boost.

We must all adapt, to adjust to cost increases in supply chains and to seek new ways to reduce energy usage. Government intervention is only justified in the most severe situations.

Unfortunately, we are in such a situation. Some businesses in our sector face energy price rises of up to 400%. Viable businesses face ruin.

A rapid VAT cut would allow businesses the flexibility to divert funds into energy bills or inflated supply costs, cut prices, soften price increases, or maintain essential investment in areas like decarbonisation.
Delay, however, can only diminish the impact of this proposal.

Itsu (Ganan Kanagathurai, UK CEO)

Just Eat Takeaway.com (Collette Bird, Head of UK External Relations)
Kebab Alliance (Ibrahim Dogus, Chair)
KFC UK & Ireland (Neil Piper, Acting Managing Director)
Pizza Hut UK (Neil Manhas, Managing Director)
Pret a Manger (Guy Meakin, Interim UK Managing Director, UK & Ireland)