Professional Comment

Government Support For H&L Is Not A Silver Bullet

By Dave Gosling, a partner specialising in the hospitality and leisure sector at accountancy firm, Menzies LLP (

From reduced VAT rates for food to the ‘Eat Out to Help Out’ scheme, measures promised in the Chancellor’s Summer Statement could prove a much-needed lifeline for the UK’s struggling hospitality and leisure businesses, helping them entice customers back through the doors and strengthen their financial position. However, in order to take full advantage of the new measures and optimise their business per- formance, decisive action to adapt business models is essential.

Recent Government measures continue to highlight the hospitality and leisure sector’s need for public support and footfall, they will not be

the silver bullet that the industry is looking for.While UK tourist desti- nations may experience an initial boost, for commuter locations, the bat- tle between outlets to secure their share of consumer spending continues.

Following Rishi Sunak’s announcement,VAT has been temporarily cut from 20 per cent to 5 per cent for the hospitality and tourism sector.To accommodate for this, businesses will need to decide their new pricing structure and update their accounting systems, electronic points of sale (EPOS), and tills in line with the new rules.This should include altering

menus and websites, and re-calculating any advance bookings, taking the VAT reduction into account.

In accordance with the new ‘Eat Out to Help Out’ initiative, where consumers can purchase meals and non-alcoholic drinks at a discounted rate each week during August from Monday to Wednesday, participating restaurants will need to analyse whether it will be profitable to open on those days.To ensure all of a business’ administration processes are accurate and have been adapted to take advantage of the VAT reduction and ‘Eat Out To Help Out’ scheme, it may be wise to seek the support of an expert; this is particularly crucial when ensuring you accurately account for VAT, capture figures for claims, and consider employee tips and bonuses.

Since the start of the pandemic, the Coronavirus Job Retention Scheme has made the biggest contribution towards helping to preserve the industry. In an ideal world, the Government would have extended the scheme further for the sectors worst affected by the lockdown, such as the hospitality and leisure industry, or provided another grant to sup- port businesses through the tougher months.

Businesses should begin preparing now for the winter period when their income stream is likely to reduce even further. By making use of cashflow modelling techniques such as three-way forecasts, it should be possible to calculate the impact that VAT changes, as well as existing and new loan repayments, will have on the business over the long-term. Forecasting cashflow, not only between now and when the furlough scheme ends in October, but also for the next 12 months, is essential to put solutions in place in good time, and avoid companies falling into

financial failure.

Although its exact scope is not clear at the moment, early Government discussions around the Kickstarter Scheme – which aims to create more jobs for young people – have suggested that to be eligible, the 16-24 year old must be claiming Universal Credit and at ‘risk of long term unemployment’.Therefore, to take advantage of the proposed scheme, businesses should be looking to make the most of their existing business partnerships, as well as actively looking to form new ones.

Many colleges offer fantastic opportunities for young people interested in pursuing a career in the hospitality and leisure sector. From chefs to front of house staff, these high-quality candidates could provide business- es with the perfect solution to any staffing issues they are currently fac- ing, as well as allowing the company to claim incentives for each young person they offer a traineeship to. In order to protect and retain as many existing staff as possible, business owners should also be looking out for any grants that may be available to them.This is particularly important for employees of hotels, weddings, and conferences, which are likely to experience extreme fluctuations in trading levels over the sum- mer season.

For hospitality and leisure businesses at this uncertain time, it is impor- tant to try and see through the fog, where possible and adapt their busi- ness models for the challenges that the coming weeks may have in store. No matter whether it’s a global chain experiencing financial hardship, or the director of a boutique cafe, spotting any warning signs early and tak- ing action is crucial; with the right support, there will often be a chance to turn the fortunes of a business around.