Budget: UK freezes alcohol duty and gives grants to hospitality firms

3rd March, 2021 by Nicola Carruthers

Chancellor Rishi Sunak cancelled the planned duty increase for spirits for the second year in a row during the UK budget today, and pledged grants of up to £18,000 (US$25,118) for hospitality businesses.

Rishi Sunak

Chancellor Rishi Sunak froze spirits duty for a second time in the UK budget

In today’s budget (3 March), the second from Sunak, duty for all alcoholic drinks was frozen.

Sunak said: “All alcohol duties are cancelled for the second year in a row. Only the third time in two decades.”

Furthermore, hospitality and leisure businesses will receive grants of up to £18,000 from April. Non-essential retail businesses will receive grants of up to £6,000 (US$8,372) per site.

This is in addition to Sunak’s recently announced £5 billion (US$6.98bn) scheme for hospitality firms and retailers in England to help them reopen after lockdown. The move replaces the current monthly grant scheme.

Last month, UK prime minister Boris Johnson revealed bars and pubs in England could reopen on 12 April for outdoor consumption, and indoors from 17 May. The government also hopes to remove all legal limits on social contact by 21 June.

Sunak previously announced £150 million (US$208m) to help communities take over local pubs that are in danger of closing.

In addition, Sunak confirmed the furlough scheme would be extended to the end of September. The furlough scheme, which pays 80% of employees’ salaries, has been extended a number of times over the past year. The government will ask businesses to contribute 10% from July, and 20% in August and September.

Furthermore, the business rates holiday will be extended until June 2021, followed by a reduction of two thirds for the rest of the year.

Sunak also confirmed that the 5% value added tax (VAT) reduction rate will be extended for six months until 30 September. After this date, the rate will be an interim 12.5% for a further six months. The VAT cut applies to food and soft drinks.

“One of the hardest hit sectors has been hospitality and tourism: 150,000 businesses that employ over 2.4 million people need our support,” said Sunak.

Trade groups have been calling for the extension of the furlough scheme and a temporary reduction in VAT for the hospitality sector.

‘Unnecessary pressure’ 

UK Hospitality chief executive Kate Nicholls welcomed the extension of the furlough scheme.

She said: “Extending the full scheme up to and beyond the point of full reopening of the sector is a welcome move. It will help keep businesses afloat and more jobs secure as they trade their way back to prosperity in the years to come. This means it is more important than ever that the government sticks to its plan to allow full reopening of venues on the 21st of June.”

However, Nicholls said that business contributions to the scheme would place “unnecessary pressure” on struggling firms.

She said: “Expecting businesses to contribute to the scheme from the end of July is a worry, though. It will place unnecessary pressure on fragile businesses just as they are beginning to get back to their feet. It is also very disappointing not to have employer National Insurance contributions removed from the scheme.

“Businesses are burning through their cash reserves and many will have exhausted them before they have a chance to reopen. Not all businesses are going to be out of the traps instantly. It will take time for them to reopen and they will be racking up costs in the meantime.”

To see how the UK drinks industry reacted to the budget announcement, click here.

The previous budget took place on 11 March last year.

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