Busy pub with drinkers

Rishi's plans to help Britain bounce back targets Hospitality sector


Today Chancellor Rishi Sunak delivered his eagerly anticipated summer economic update. Much of the announcements were as had been trailed in the last few days with just a couple of surprises. His £30bn package of measures are all aimed at supporting, creating and protecting jobs, with some specifically targeted boosts for the hospitality sector in an attempt to get pubs and restaurants “bustling again”.

In an economy more reliant on social consumption than other economies, and a hospitality sector which is the third-largest employer in the country, a temporary VAT reduction and a new “Eat Out to Help Out” scheme were among the biggest announcements for the sector.

The main headlines for the Hospitality sector were:

  • The rate of VAT applied on most tourism and hospitality-related activities will be cut from 20% to 5%. Saving households around £160 per year on average. Rather disappointingly though, the VAT cut, effective from next Wednesday and lasting until 12 January 2021, will not apply to alcohol served in pubs or restaurants. A wider VAT cut would also have boosted consumer spending further. B&B owners below the VAT threshold may also feel let down, compounded by missing out on the cash grants earlier in the year or receiving little or nothing from the local authority discretionary grants. For those hospitality sector bsuinesses who provide wedding packages, we are awaiting HMRC’s detailed guidance in the coming days, to see how much of their offerings may benefit from the temporary relief’
  • To encourage people to return to eating out at restaurants the Government’s new “Eat Out to Help Out” discount scheme will provide a 50% reduction for sit-down meals in cafes, restaurants and pubs across the UK from Monday to Wednesday every week throughout August 2020. Meals eaten at any participating business will be 50% off up to a maximum discount of £10 per head for everyone, including children. The Chancellor said Businesses will need to register for the scheme and funds will hit their bank accounts within five days. The £10 limit may not be high enough to incentivise use of these vouchers on the scale they expect to see but any measures which encourage eating out must be seen as a bonus.

Some of the more immediate practical matters for consideration on the VAT cut will include the need for businesses to review their pricing – retaining the advantage of the VAT cut whilst having competitive pricing which encourages people into their establishments. Businesses will also need to consider the impact on till settings and make sure their accounting software is ready to account for VAT at the new rate where applicable.

More details on the integration with Xero, Quickbooks and Sage can be found here.

A Job Retention Bonus will also be introduced to help businesses keep furloughed workers. Employers will receive a one-off bonus of £1,000 for each furloughed employee they bring back who is still employed as of 31 January 2021. Employees must be paid at least £520 on average, in each month from November to the end of January - the equivalent of the lower earnings limit in national insurance. This ties in with the end of the Furlough Scheme, which he confirmed will not be extended.

Wider measures for jobs also included a new £2 billion Kickstart Scheme to create hundreds of thousands of new, fully subsidised jobs for young people. Those aged 16-24, claiming Universal Credit and at risk of long-term unemployment, will be eligible. Funding available for each six-month job placement will cover 100% of the National Minimum Wage for 25 hours a week – and employers will be able to top this wage up. Also in the announcements was a £111 million investment to triple the number of traineeships, and £2,000 will be paid to businesses for every new apprentice in the next six months (£1,500 for those aged over 25). 

As a huge employer, particularly of young people, the Hospitality sector will generally welcome these announcements and hope to see the fruits of these boosts over the coming months. However, the worry for those in the sector may be that, without further direct support in the way of more grant funding, they don’t have the time to trade their way out of difficulty. General Secretary of the Trade Unions Congress Frances O’Grady criticised the tapered end of the furlough scheme. “I worry that the chancellor hasn’t provided that bridge between having nine million people on furlough... and what happens come October…A little tweaking around the edges is not going to provide the plan that we need for those industries that are critical to this country’s future.”readMore Hospitality, Leisure & Tourism News

If you would like to read more articles related to the hospitality, leisure and tourism sector, visit our latest news page here.

More Hospitality, Leisure & Tourism News

If you would like to read more articles related to the hospitality, leisure and tourism sector, visit our latest news page here.

For more information or advice on how the chancellor's summer statement impacts you, please get in touch with Richard Askew on 01900 310440 or email richard.askew@armstrongwatson.co.uk. Alternatively, for Covid-19 Business Support and the latest guidance please follow the link below.

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