The hospitality sector has given a mixed reaction to chancellor Jeremy Hunts spring Budget which saw alcohol duty frozen for another six months, and an increase in business rates which according to business real estate intelligence group Altus will see almost 220,000 English businesses with a rateable value of £51,000 and above shoulder the costs as rates rise in the next financial year (April 1 for 2024-25).
CAMRA Chairman Nik Antona said: “The Budget was a missed opportunity to show ‘backing for the Great British pub’ by significantly cutting tax on draught beer and cider served in pubs. However, freezing alcohol duty until February 2024 will be welcomed by consumer and breweries, helping mitigate an additional hike in costs to be passed on to pubs and pub-goers.
“Making duty on draught beer and cider significantly lower would promote drinking in the regulated setting of a community local and help small and independent producers who sell mainly into pubs and taprooms to compete against the global brewing giants and the likes of supermarket alcohol. CAMRA will continue to campaign for the Treasury and all political parties to back our sensible ask of making tax on pints in pubs 20% lower than the general duty rate.
“The Chancellor’s announcement that the VAT registration threshold for small businesses will be increased will not benefit the majority of pubs, breweries or cider producers. Cutting VAT on all sales in the hospitality sector would have been a simple way to support consumers and beer and pub businesses in all parts of the UK – helping to keep the nation’s pubs, social clubs and breweries alive and thriving at the heart of communities and local economies. The Chancellor should still consider cutting VAT for these businesses to ease the significant financial burdens on the sector and help to reduce the rate of pub and brewery closures which deprive consumers of community pubs and choice of local beers.”
Spiralling Costs
Kate Nicholls, Chief Executive of UKHospitality, said:
“The Chancellor missed a real opportunity today to show that he backs hospitality and understands the real pain that operators are enduring.
“He had a chance to accelerate and unlock hospitality, but instead he has delivered a cut-and-paste Budget, maintaining the status quo which continues to act as a drag on recovery.
“Over the past year, we have had a Budget for growth and an Autumn Statement for investment – neither have delivered because they were not correctly targeted. The National Insurance cut earlier this year was intended to boost disposable income to generate growth and didn’t have an impact. A different result can’t be expected this time around.
“Government needs to take a different approach. It needs to bear down on the never-ending rising costs that are forcing businesses to shut their doors for good – taking away people’s livelihoods and robbing communities of a vital asset.
“Increases to business rates and jobs taxes in April will only increase bills further and contribute to inflation, as venues will be forced to pass on these costs onto consumers.
“The entire sector was united behind UKHospitality’s asks to lower the rate of VAT, cap business rates increases and reduce employer wage costs.
“A lower rate of VAT would have been a bold reform that would drive economic growth, keep prices down and unlock investment in the sector, one that was projected to grow six times faster than the economy as a whole. It would have been good for businesses, the public and the economy.
“Hospitality is a sector proven to be a catalyst for growth across the entire nation, as the foundation of the everyday economy. When we perform, the entire economy performs. It’s a great shame that the Chancellor has not recognised that today.”
Emma McClarkin, Chief Executive of the British Beer and Pub Association said:
“It is good news that the Chancellor was able to extend the freeze to beer duty at this Budget and will be welcomed by brewers, pubs and consumers alike and will go some way to keep the price of a pint affordable.
“However, this April brewers and pubs still face a £450 million cliff edge of spiralling wage costs and business rates increases, particularly those pubs that are larger or food-led. It is disappointing that the Chancellor did not choose to go further with a cut duty, reduce VAT or cap the increase to the business rates multiplier which would have helped mitigate the huge cost of doing business. Pressures on our sector remain acute with margins being squeezed to the point where we fear it is likely that a further 500-600 pubs are likely to close this year on top of the 530 that closed in 2023. No government should turn a blind eye to the erosion of such an integral economic, social and cultural asset and it is vital that at the election the political parties commit to putting in place a fiscal and policy framework that will see our sector thrive for the long term and not continue to deteriorate.
“We very much hope that the decision to cut National Insurance contributions for all workers by 2p in the pound will boost consumer spending power and encourage people to enjoy an extra pint in their local, but I urge the Government to look again at the urgent measures needed to make the cost to doing business more affordable at the next fiscal event and through policy commitments made in the run up to the election to truly back the British Pub.”
Catastrophic Challenges
The economic challenges faced by our sector are catastrophic, and following today’s spring budget announcement, the lack of support will have a profound impact on this sector for years to come,” stated Michael Kill, CEO of the NTIA. “For months, the entire sector has been providing the Government with critical information outlining our precarious situation and the urgent need for supportive measures to sustain businesses through these turbulent times.”
The decision to freeze duty on alcohol and fuel, the increase in VAT threshold while appreciated, falls woefully short of addressing the comprehensive financial support required by businesses. The NTIA warns that the budget’s inaction will only worsen losses, leading to widespread job cuts and economic hardship. This neglect, compounded by the sector’s fragility over the past four years, threatens to push it further into crisis, with long-term implications for employment and tax revenues.
“Even the autumn budget last year, which extended business rates relief, was marred by the Government’s use of it to offset increases in the National Living Wage, demonstrating a pattern of giving with one hand and taking with the other,” added Kill.
The NTIA accuses the Government of prioritising political posturing over the well-being of businesses, suggesting that the budget is more about positioning for the upcoming election than addressing the sector’s needs. Such disregard for the livelihoods and economic contributions of the night-time industry is unacceptable, asserts the NTIA, calling for immediate action and expressing readiness for an early election to effect meaningful change.
“In simple terms, it’s time for change. We have lost faith in the Government,” Kill Stated. “The livelihoods and businesses we represent are not political pawns but vital contributors to community well-being across the UK. It is imperative that the Government recognises this and takes decisive steps to support the sector.”
Steve Alton, BII CEO commented:
“The Spring Budget statement this afternoon delivered no support for independent pub businesses in every village, town and high street across the UK. The freeze on duty until February next year will not help pubs, who have been facing huge inflation in every area of their business, high energy costs, wage rises and reduced footfall from consumers facing their own cost of living crisis.
“Our members and the wider hospitality industry are in urgent need of meaningful investment to allow them to thrive as essential hubs of their communities, delivering vital social connection, all whilst supporting local employment and local supply chains. This Budget simply did not deliver to safeguard incredibly successful operators, who are struggling with profitability, whilst being unfairly and disproportionately taxed.”
Relief Delivered
James Burgess, Head of Commercial and insolvency expert at Atradius UK, says:
“Hunt’s promises of relief for pubs and hospitality firms were certainly delivered in today’s Spring Budget announcement.
“Putting the alcohol duty on ice for a further six months will be a crucial step for hospitality firms, further boosted by the Conservatives offering a 12 -month extension of the fuel duty freeze, an increase in the VAT threshold to £90,000, and a full expensing tax break. With a predicted 2p decrease in National Insurance and a commitment to hitting inflation rates targets, we should see increased consumer spending in the sector as we approach the warmer summer months.
“Britain’s hospitality sector employs more than 2.53 million people, but more than 10 firms are closing every single day. While the Spring Budget announcements are a positive step, the government must have the bottle to continue this progress and protect the future of UK hospitality.”
Chief Executive of the Scotch Whisky Association Mark Kent said:
“ The industry welcomes the Chancellor’s recognition of the benefits of continuing the duty freezes beyond August this year. That decision supports the Scotch Whisky industry, will incentivise investment and, as with previous cuts and freezes, boost Treasury revenue. With cost pressures hurting our bars and pubs, not to mention hard pressed consumers, the Treasury has provided some much-needed certainty and stability for the year ahead.
“Despite this freeze, Scotch Whisky is still put at a disadvantage by the duty system, based on a fundamental misunderstanding of how people consume alcohol and modern drinking trends. With today’s freeze cider is still taxed four times less than a spirit like Scotch Whisky and responsible consumers who enjoy a Scotch are paying too much tax compared with a beer or cider. Looking ahead, we will continue to work with the UK Government to ensure that our tax system is supporting the long-term success and prosperity of our iconic homegrown sectors such as Scotch Whisky, so that Scotch and other high-quality spirits are not put at a competitive disadvantage in the UK and other markets around the world.”
Rupert Thompson, managing director of Surrey-based Hogs Back Brewery, said:
“The extension of the alcohol duty freeze to February 2025 is very welcome. A pint of beer in the local should be an affordable treat, not an expensive luxury.
“We’re pleased that the Chancellor acknowledged the enormous value of pubs to British society in his speech. Pubs provide the only route to market for draught beer, particularly cask ale. It’s something that they can uniquely offer to their customers, so are vital to us as a brewer.
“Without thriving pubs, cask’s future looks very bleak, which would be a tragedy for this uniquely British beer, the many drinkers who enjoy a pint of it in their local, and the thousands of people employed by local breweries.”
Missed Opportunity
Kay Buxton, Chief Executive of Marble Arch London BID, said:
“Although shopping accounts for 46% of all tourist spending, 54% is spent on hotels, eating out, and visitor attractions so it is frustrating that the Chancellor has again ignored widespread calls from industry experts to remove the tax of spending for international visitors.
“Independent research suggests that removing the tax on tourist spending would have led to an extra £3bn being spent on hotels, restaurants, retail, and visitor attractions by overseas visitors. The introduction of taxing tourist spending has damaged the international appeal of the UK for international visitors, so this is another missed opportunity by the Chancellor, which would have provided a much-welcomed boost for hospitality and the visitor economy.”
Joss Croft OBE, CEO, UKinbound:
”We applaud the cut in national insurance and freezing of fuel and alcohol duty, which will positively impact many that work in the UK’s tourism industry, but the absence of a new fiscally positive tax-free shopping scheme is a huge missed opportunity, that would stimulate growth and bring massive and much needed additional export revenue to the UK. This is a shame as international tourism is incredibly competitive, and with the right policies this industry can quickly deliver incredible growth for UK plc in the short and long term.”
