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VAT cut and discount scheme welcomed by industry as chancellor gives it a 'fighting chance'

08 July 2020 by

Chancellor Rishi Sunak's decision to slash VAT for hospitality to 5% and introduce a "first of its kind" government discount scheme to encourage people to eat out in August, has been welcomed by the industry.

On Wednesday the chancellor said VAT would be cut on food, accommodation and attractions for six months from 20% to 5%, in what he described as a £4b catalyst for the industry.

In a further bid to protect roles for the industry's workers, Sunak also launched an Eat Out to Help Out scheme, which will see the government subsidise 50% of meals eaten at participating restaurants from Mondays to Wednesdays in August to the value of £10 a head.

Businesses can claim back money through the scheme weekly with funds in their bank accounts within five days.

The measures have been described as a "lifeline" by Anna Haugh, chef patron of Myrtle in Chelsea. She said: "It finally feels like we can breathe again! It's great news this is for our industry and will allow us a fighting chance. With the limited covers and extra costs, not having an income for the past few months, this is a lifeline for us."

Samuel Buckley, owner of Where the Light Gets In restaurant in Stockport, said: "We are being tested every day, and our industry is suffering a great deal. This is giving us a means to survive and allowing people who are comfortable to eat out, an affordable opportunity."

Nick Gilkinson, founder of Townsend in London's Whitechaprl added: "The voucher scheme is potentially quite interesting - restaurants will need to be creative in order to get the most out of this, but for a small restaurant like ours, it means we have a chance of being able to serve 40 people (over two seatings) rather than just 20 on a Wednesday. We weren't originally planning to open mid-week, however because of this scheme it looks like we will be able to to do. "

The chancellor has also announced a reward scheme for employers who successfully bring staff back through a Job Retention Bonus.

In what Sunak called a "plan for jobs", he outlined an initiative to keep furloughed workers in their roles. Employers will be paid £1,000 per employee brought back and kept in employment through to January, as long as the employees earn at least £520 each month from November to January.

To help young people, who have been particularly hard hit, the chancellor also announced a Kickstart Scheme, which will pay employers to create jobs for 16- to 24-year-olds. The government will pay young people's wages for six months if hour and pay requirements are met. Employees will also be paid £1,000 to take on trainees and £2,000 to take on apprenticeships, with a further bonus for taking on those aged 25 and over.

Sunak said the country was facing "profound economic challenges", with job losses the most urgent of these. He explained: "We have taken decisive action to protect our economy but people are anxious about losing their jobs and about unemployment rising. People need to know we will do all we can to give the opportunity of good and secure work."

Responding to today's statement UKHospitality chief executive Kate Nicholls said: "It is reassuring that the chancellor singled out hospitality and tourism as a vital part of the UK's economy and a pillar of social life around the UK. It is also good to see that government acknowledges that our sector has been uniquely hit by this pandemic.

"Customer confidence is key to our sector's revival and our ability to help Britain's economic recovery. Applying every precaution to provide safe venues will count for nothing if customers are not coming through our doors. This significant VAT cut, heightened ability to retain staff and incentives for consumers to eat out together amount to a huge bonus. We hope that the UK public rightly sees it as sign that we are ready to welcome them back safely. The future of many businesses and jobs depends on it."

She continued: "This doesn't mean we are out of the woods, and there are still significant challenges ahead. The biggest of these is the spectre of rent liabilities which many businesses are still facing from their closure period. Rent bills have piled up over the past few months even though venues were closed, and businesses are now facing huge rent debts with prospects for the future still in the balance. We are going to need government support on this before too long."

Joss Croft, CEO of UKinbound, added: "The chancellor's economic recovery plan clearly recognises the value of hospitality and tourism, and cutting VAT from 20% to 5% and the Eat Out to Help Out scheme will deliver immediate positive impacts for businesses and consumers.

"The Job Retention Bonus Scheme will also help tourism and hospitality businesses, but only those that survive into next year. These measures will not help the many businesses involved in inbound tourism who drive regional economies and jobs, and who are on the brink; longer-term support will still be required for these businesses, which have been hit even harder than domestic and outbound."

There were however concerns that pubs, particularly wet-led venues, would not see the benefits of the wider industry. CAMRA's chief executive Tom Stainer said: "While a six-month cut in VAT for food served in pubs and the Eat Out to Help Out voucher scheme in August is welcomed, we are concerned that pubs have been left behind by the chancellor's statement, which contained little support for community pubs. It is also disappointing to see no direct support for independent brewers and producers, who will not benefit from a VAT cut that specifically excludes beer and cider.

"CAMRA will continue to campaign for greater support for all pubs - including those that don't serve food. We are calling for long-term support measures – business rate reform and a tax reduction for draught beer – to encourage people back to the supervised setting of the community pub."

Picture: Shutterstock

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