The hospitality and licensed on trade industry has reacted with dismay at the Chancellor’s announcement yesterday Rishi Sunak’s Winter Economy plan.
Commenting on the plan, Emma McClarkin, Chief Executive of the British Beer & Pub Association, said:
“Following the additional restrictions announced earlier this week and their devastating impact on the already precarious situation our sector is in, we were really hoping for a strong package of support today. Some elements of the Chancellor’s plan today are welcome, but do not go nearly far enough to save the thousands of pubs and jobs that we have highlighted are at serious risk.
“The VAT cut extension on food and soft drinks will help our sector and it is great to see the Chancellor answer our urgent call for this. However, the extension is only for six weeks and only takes us through to the end of the current restrictions – it needs to be much longer to help our sector recover.
“Furthermore, where those pubs and bars that are not food focused are concerned, the Chancellor has missed a golden opportunity to extend the VAT cut to include alcohol.
“The new flexible job support scheme is needed considering that the furlough scheme will end next month, but with a lower level of funding from Government that will cost employers more, we are not confident it is enough to protect jobs in the current trading conditions. We will need to closely monitor the effectiveness of this scheme with our members and invite the Government to work with us if changes to the scheme are required.
“As brewing businesses are also greatly impacted by the curfew and the tighter restrictions pubs now face, they need more support too. With no direct support for them in today’s announcement, it is imperative that a beer duty cut is top of the list for the Chancellor at the next Budget, which would greatly help wet led pubs too.
“It is very concerning to see the Chancellor not extend the business rates relief for pubs. Pubs now face a cliff edge come March 2021 where they will have to pay on average £25,000 each per rate paying pub. That’s a cost of £800 million to the sector which will be the final straw for many pubs. We need the Chancellor to review this and extend the business rates holiday as a matter of urgency.
“Increasing access to Government loans, and extending the lengths to pay them back, will help some pubs, but for many, taking on further debt in the form of a loan isn’t even a viable option – particularly at this stage.
“We need the Government to recognise that consumer confidence is fragile and the additional restrictions that could be in place for a further six months will only make this worse. We are asking them to consider ways they can help boost consumer confidence including running the successful Eat Out To Help Out scheme again and offering sector specific grants for pub businesses.”
UKHospitality Chief Executive Kate Nicholls said: “The announcement of further restrictions yesterday was a significant hammer blow that will inevitably depress trading. It was crucial that the Chancellor delivered support today that specifically targeted the hospitality sector which has been hit harder than any.
“The announcement of flexible employee support is a move in the right direction, but hospitality needs more targeted efforts to support jobs. Almost 1 million people in our sector are still on furlough. We need Government to go further in hospitality, recognising the greater restrictions imposed upon us, and pick up the full cost of unworked hours. This would be a relatively low cost for huge reward for our workforce. Full support to sustain people in their jobs during what could be a pretty bleak winter for hospitality would be a great step forward.
“Looking ahead, the extension of the VAT cut was absolutely critical. UKHospitality had pushed hard for it, so it is great to see the Government taking note of our major concerns about recovery into 2021, though this must be extended further. The announcement of longer tax deferrals and the option of longer loan repayments should deliver some much-needed breathing room for employers.
“Things were looking grim for our sector yesterday and we were desperately hoping for some good news. The Chancellor has given us some reason to be positive again, but we urge him to engage with the trade on specific measures to keep people in work. While some of these measures announced today will give businesses a future to shoot for, and hope that they can begin to rebuild, we are still not out of the woods.”
Ross Hindle, UK pubs and hospitality sector analyst at Third Bridge. Said: “The UK hospitality executives we’re speaking to say Q1 and Q2 next year are going to be very tough for the pub trade as VAT goes back up, suspended payments become due, unemployment bites, business rates return, and rent relief tapers away. Some say a so-called ‘polo mint problem’ has already emerged, with inner-city pubs fighting for survival, whilst community and suburban pubs, typically serving food, do better. Overall, experts say, the UK is likely to lose between 1,500 and 2,000 pubs over the next 12 to 18 months.
“We’re told many pubs only become profitable at between 70% and 80% capacity, yet social distancing regulations and the rule of six mean many public houses are now capped at around 50-60% capacity – and so unable to break even. The usage of outdoor space can bolster that percentage but its impact is expected to fade as the winter months draw in.
“We’ve been told that in 2019 UK pub revenues were around £25bn, however in H2 this year pubs are expected to deliver just 55% of last year’s revenue level and that’s without another national lockdown. Experts are telling us that even by the end of 2021, UK pubs should deliver only 92% of 2019 revenue levels. In real terms that would mean many publicans making only half of their usual profits. That said, executives say pubs will over-index or gain market share against the hospitality sector in general – winning against full-service restaurants, hotels, plus travel & leisure establishments. Overall we are hearing the pubs business will get back to 2019 levels of revenue in late 2022 or 2023.”
Christian Mole, EY UK & Ireland Head of Hospitality & Leisure, said: “While the hospitality sector will welcome the support measures announced today, including Pay As You Grow, the Job Support Scheme and the sector-specific VAT rate freeze, many will have been hoping for more generous direct intervention in recognition of the particular challenges that the sector faces. Social distancing measures continue to constrain both operating capacity and customer demand, and pubs and restaurants have been further impacted by the 10pm mandatory closing time. The hotels sector will face depressed demand for some time due to decreased business travel and inbound tourism, which may result in continued closures and resulting job losses.
“The hospitality sector was already facing difficulties before the pandemic and is now undergoing an accelerated transformation. Businesses that are resilient enough to survive may ultimately emerge to form a healthier and more profitable sector but a smaller footprint could be the cost.”
Neil Pattison, Director of Caterer.com said ““An extended VAT cut is good news for the sector but with hundreds of thousands of workers still on furlough and businesses under increased pressure due to new restrictions, the government needs to do a lot more to protect jobs – covering 22% of wages when businesses can’t do their usual trade just isn’t enough. Despite seeing a small increase after Eat Out to Help Out, hospitality job vacancies are still at a low point and we’re seeing thousands of workers apply to jobs in hospitality and other sectors every day through Caterer.com’s Redeployment Hub. Without proper, immediate support, more businesses may be forced to close and the incredible talent we have in the sector may be forced to seek work elsewhere or face becoming unemployed. With the ‘summer of staycations’ drawing to a close and Christmas gatherings under threat, we need more creative policy to hold onto hospitality’s workforce