Two-thirds of hospitality face £150m rates hike

Yesterday’s announcement (22 November) brought mixed results for the British on-trade, with UKHospitality stating that the majority of the sector will face a £150 million (US$187.6m) rates hike.

Jeremy Hunt’s budget extended the alcohol duty freeze until August 2024, prompting a lukewarm response from spirits associations and distillers.

The chancellor also announced an extension of business rates relief until August next year.

A 75% discount for retail, hospitality and leisure businesses was introduced following the pandemic, with UKHospitality stating that an extension of the policy could save the sector £630 million (US$765m).

The discount allows businesses to claim relief up to £110,000.

Hunt also froze the small business multiplier for a further year, though the standard business multiplier will increase by 6.4%.

UKHospitality chief executive Kate Nicholls said: “The chancellor has brought forward a significant package of business rates measures that will help hospitality businesses across the country.

“The decision to freeze the small business multiplier will help those most vulnerable keep the lights on.

“However, the standard multiplier rising by 6.4% will see businesses representing almost two-thirds of the sector’s trade still facing a £150m rates hike. This will only put more pressure on consumer prices and inflation, at a time when businesses are still grappling with high costs of energy, food, drink and wages.

“We’re pleased that the chancellor has also acted on our proposal and frozen alcohol duty until August next year. This is now one less cost that venues have to worry about. With duty frozen, this should substantially constrain any cost increases passed on by drinks producers.”

On Twitter, Sacha Lord, the night-time economy adviser for Greater Manchester, posted: “I’m pleased to see the chancellor has listened and agreed to extend the current business rates relief in today’s statement. The extension will allow hospitality operators a bit of breathing space.

“We must now work together in calling for a VAT reduction in the spring budget.”

Lord has been campaigning for the current 20% VAT rate paid by hospitality to return to a reduced rate of 12.5%.

Lyle Bignon, night time economy ambassador for Birmingham, working on behalf of the Night Time Industries Association (NTIA), described the statement as ‘a missed opportunity to support the UK’s fifth biggest industry’.

“The night-time economy (NTE) is the fifth-largest industry in the UK. However, today’s announcement from the chancellor is nothing short of a missed opportunity to support NTE businesses and workers who are facing an unprecedented challenge, verging on an existentialist crisis.

“The freeze on alcohol duty is a temporary fix, which in isolation will barely scratch the surface in tackling the NTE’s serious challenges for growth. However, we fully welcome the extension of business rates relief, which may make the difference between some businesses – in particular, venues – staying afloat in the next financial year.

“One of the biggest disappointments in Hunt’s statement is no VAT relief, which would be a lifeline to businesses struggling under extremely challenging market conditions.”

James Burgess, head of commercial and insolvency expert at Atradius UK, added: “Jeremy Hunt has bottled it on relief for pubs. Hunt’s promises of relief for pubs and hospitality firms deliver half measures for thousands of struggling businesses in the sector.

“Our own data shows an 11% increase in late and failed payment claims in that past year, highlighting how frequently hospitality firms are struggling with balancing their books. Freezing alcohol duties until 1 August and the extension of the 75% business rates will give a £350 million boost. However, with one in 10 pubs at risk of closing, we’re concerned it doesn’t go far enough. While this will offer short-term respite for businesses, Hunt has admitted this can’t continue forever, meaning the future remains uncertain.

“Britain’s pubs employ over 220,000 people, but with two closing every single day in the UK – twice the rate of 2022 – bigger action and longer-term growth strategies are needed to revive the sector and prevent the loss of establishments that often live at the heart of communities. While this is a positive step, the government must have the bottle to go further and protect the future of UK hospitality.”

The view from Scotland

Although some of the policies announced in the statement apply to the whole of the UK, including the alcohol duty freeze, the Scottish government sets its own business rates.

Stephen Montgomery, director of the Scottish Hospitality Group, commented: “Across the UK, many hospitality businesses are on the brink. The support announced for the hospitality industry by the chancellor in his autumn statement is welcome and gives English and Welsh pubs, hotels and restaurants a fighting chance at survival.

“For Scottish hospitality venues, it’s the decisions taken by the Scottish government that matter. The chancellor’s decision to extend 75% business rates relief for hospitality businesses in England must be at least matched by the Scottish government at the Scottish budget. There are just four weeks to save Scottish hospitality – we call on Shona Robison [deputy first minister] to rise to the challenge and give Scottish hospitality a lifeline.”

Colin Wilkinson, managing director of the Scottish Licensed Trade Association (SLTA), added: “We welcome the news that our alcohol duty has been frozen – this comes as a relief for pubs and the wider hospitality industry north of the border.

“However, the key takeaway from Jeremy Hunt’s statement yesterday – the extension of 75% business rates relief for hospitality and retail in England for another year – sends a vital message to the Scottish government that this should be replicated in Scotland.

“We were also disappointed that the chancellor ignored pleas from the SLTA and other industry groups for a VAT reduction for the hospitality sector. This was a great help to businesses during the pandemic and to reduce VAT again now – at a time when so many businesses are struggling with rising utilities and other costs – would bring a real benefit to the sector.

“Recruiting staff continues to be a major barrier to growth for much of the hospitality industry and it is crucial that we see more flexibility in immigration and measures put in place to allow asylum seekers to work. And with the National Living Wage increasing next April from £10.42 to £11.44, it would have been good to see the chancellor give us something to mitigate this increase and other increased costs currently facing businesses.”