Budget reaction: trade bodies welcome 'crucial support' but long-term stimulus still needed

By James McAllister

- Last updated on GMT

Budget 2021 reaction: trade bodies welcome 'crucial support' but long-term stimulus still needed

Related tags: Budget

Hospitality trade bodies have broadly welcomed today's (3 March) Budget by the Chancellor, but warn that long-term stimulus will still be needed as the sector starts to recover.

In the House of Commons, Chancellor Rishi Sunak set out his vision to help the economy recover from the Coronavirus crisis​ as it gradually emerges from lockdown in the coming months.

Both the business rates holiday and VAT cut to 5% for hospitality will continue in to the next financial year, but be tapered as businesses are able to unlock; one-off 'restart grants will be introduced; alcohol duty will be frozen; furlough will be extended to the end of September; and support for the self-employed will be broadened.

“The Chancellor has listened to the concerns of the hospitality sector," says Kate Nicholls, chief executive of UKHospitality.

"Details are yet to be pored over but it looks like crucial support will help businesses at a critical time.

“The Chancellor has announced support to help our sector get back up and running, now it is vital that the Government sticks to its date of June 21 for a full reopening of the sector.

"Delay would see more businesses fail, more jobs lost and undo much of the good work the Chancellor has done to date.”

In the lead up to the Budget, UKHospitality made repeated calls for the Chancellor to extend the business rates holiday and VAT in order to give the sector a fighting chance of weathering the pandemic.

Sunak confirmed that the business rates holiday will be extended through to the end of June, and then be discounted for the remaining nine months of the financial year by two thirds, up to a value of £2m for closed businesses, with a lower cap for those who have been able to stay open.

Meanwhile, VAT applied to food - both eat in and takeaway - accommodation and attractions will continue to be cut to 5% for a further six months to 30 September, followed by interim rate of 12.5% for another six months.

The standard VAT rate of 20% will not return until April next year.

Nicholls says the two extensions will give some much-needed breathing room for businesses as they prepare to reopen.

“While it would have been better to have extended the 5% rate further, it is now vital that the Government looks at introducing the interim rate for hospitality on a permanent basis," she says.

"It would be a positive legacy of an otherwise dreadful year for our sector. A permanent reduced rate of VAT for hospitality would redress the unfair tax imbalance that our businesses have faced for too long and make us internationally competitive."

A need for long-term stimulus

The British Beer and Pub Association (BBPA) has also welcomed the extension to existing rates and VAT support, as well as the introduction of the £5bn 'restart' grants scheme - which will give hospitality businesses access to one-off payments worth up to £18,000 on a per property basis.

According to BBPA chief executive Emma McClarkin, the scheme is worth £400m to the pub sector.

"The new grants will go some way in helping many of them survive through to the time when they can reopen and operate viably," she says.

"It is, however, crucial that the Government ensures all pubs benefit, including those that are part of a group, by removing the current State Aid cap."

Overall, McClarkin believes this was a good Budget for pubs and breweries in the short term, adding that while the freeze in alcohol duty will provide some much-need relief, a cut in beer duty would have provided longer-term support.

"This is just the start of the journey on the hard road to long-term recovery for our sector," she says.

"The Chancellor has made it clear he recognises the vital role local pubs play in their communities. Now he must continue that commitment by ensuring Britain’s pubs and breweries are supported in the long term. 

"This should start by extending the VAT cut on hospitality to all drinks until at least the end of the year. We also need a fundamental reform of VAT, business rates and beer duty to ensure that the thousands of pubs and breweries across the UK can thrive and help drive the social and economic recovery we urgently need.”

The looming rent crisis

One area conspicuous by its absence was the matter of rent, and the growing arrears bill being amassed across the sector.

It is understood that close to £3bn in unsettled rent will have accumulated within hospitality by the end of March when the lease forfeiture moratorium, which prevents landlords from repossessing commercial premises if businesses are unable to pay their rent as a result of the Coronavirus pandemic, is currently set to expire.

Many had hoped that, following recommendations from the Business, Energy and Industrial Strategy (BEIS) Committee earlier this week, the Chancellor would use today's speech to address how the Government plans to feel with the looming crisis, but instead it wasn't even mentioned.

“The biggest gap in support remains the outstanding sector rent debt," says Nicholls.

"We need the Government to announce an extension of the moratorium at the earliest opportunity, and work with industry to establish a landing zone to resolve this millstone around our recovery."

Disappointment for the night-time economy

The matter of spiralling commercial rent arrears is also a concern of Michael Kill, CEO of the Night Time Industries Association (NTIA).

A recent poll by the trade group revealed that for nearly 80% of night-time economy businesses, this Budget was critical to their survival. Having been closed since the onset of the pandemic, many businesses in the space have now received no income for close to a year, and the majority have been unable to secure grant support from the Cultural Recovery Fund (CRF), set up last year to support the arts sector.

What's more, the only solution seemingly offered to those businesses unable to access other additional funding was a new Recovery Loan Scheme, which will replace the existing Government-guaranteed Business Interruption and Bounce Back loan schemes and run until the end of the year.

Businesses will be able to access loans of between £25,000 and £10m, with the Government providing lenders with an 80% guarantee.

In Kill's eyes, the support offered by the Chancellor today is nowhere near enough to undo the damage already done.

"The Budget is yet another statement from the Chancellor that has failed to recognise the need for additional support for the night time economy sector," he says.

“With no meaningful expansion to CRF eligibility, and no bespoke support for our sector, we are once again left with a package totally incommensurate with businesses’ costs - including spiralling commercial rent arrears. The loan solutions outlined by the Chancellor just aren’t good enough for businesses that are already overburdened with debt.

"The Chancellor is now at risk of snatching defeat from the jaws of victory. With the money spent on support to date, it is ridiculous that many nightlife businesses may now fall at the final hurdle. The blame for this unnecessary personal hardship, and damage to the wider economic recovery, will fall at the Chancellor’s feet, unless he acts to ensure that proportionate sector specific grant funding is available immediately for night-time economy businesses.”

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