Pret and McDonald's slash prices as operators split on VAT cut

15 July 2020 by
Pret and McDonald's slash prices as operators split on VAT cut

Pret a Manger and McDonald's are the latest operators to announce they will be cutting prices in line with the temporary VAT reduction.

The moves are at odds with the majority of the hospitality sector, which desperately needs the funds to maintain jobs while operating at reduced capacity.

McDonald's said that it had encouraged franchisees to support the move and take 40p off the cost of an extra value meal, while Pret said that from Friday guest could expect lower prices on all food, with the cost of an eat-in tuna mayo baguette reduced from £3.60 to £3.15.

A Pret spokesperson said: "We will be passing on the savings of the temporary VAT reduction to our customers. From today, you'll be able to enjoy your takeaway coffee for a little bit less and from Friday this week, you'll be able to enjoy lower prices while eating in at your local Pret."

A temporary cut in VAT from 20% to 5% was announced by Rishi Sunak last week in order "to support businesses severely affected by forced closures and social distancing measures".

However, other large groups including JD Wetherspoon and Brewdog have promoted the fact that they will be passing on the savings.

Peter Banks, managing director of Rudding Park in Harrogate, was among a group of operators who told The Caterer that this action might lead customers to believe the VAT cut should be passed on, rather than used to help businesses recover from months of closure and the requirement to reopen at a lower capacity.

He said: "I have already had many guests asking for ‘their money back'. It is my belief that the government made this a sector specific VAT cut to throw a lifeline to a fundamentally damaged industry, not to pass the saving on to our guests.

"The reason Rishi did this was to save jobs and businesses. Every time one of us gives the VAT back to a guest, we are increasing the pressure on other businesses to do the same, the logical conclusion to this is that those businesses will not make as much money, and therefore have to make more redundancies. The equation is simple. VAT refunds to guests equal redundancies."

UKHospitality chief executive Kate Nichols said that operators should do "what works for them" to make sure their businesses survive.

She said: "The statement in which the chancellor announced the VAT cut to 5% was made with the clear objective of protecting the hospitality and tourism sectors and, explicitly protecting jobs.

"In a sector with diverse offers, it is right that individual businesses, which are under enormous financial pressure after three months of closure, have the scope to do this in a way that works best for them as well as providing great value to customers, securing our valued workforce and making sure our much-loved businesses endure."

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