Two fifths of operators ‘being kept afloat by VAT cut’

27-Aug-2020 - Last updated on 27-Aug-2020 at 09:30 GMT

Tax cut: the reduction in VAT from 20% to 5% is applied on food, non-alcoholic drinks and accommodation

Related tags Legislation Government Finance Vat

Some 39% of hospitality and leisure sector leaders have said the VAT cut on food, soft drinks and accommodation is keeping them afloat, according to a new study.

The survey of more than 300 senior hospitality and leisure executives by Barclays Corporate Banking also saw 40% hail the VAT reduction a “lifeline” for the sector.

While respondents predicted a 41% year-on-year decline in sales, almost a third (30%) anticipated growth in the autumn and 83% think taking will improve in winter.

Barclays Corporate Banking head of hospitality and leisure Mike Saul said: “The hospitality sector has been one of the hardest hit and the road ahead is tough."

Highly resilient sector

Saul added: “The Government schemes, particularly the Eat Out to Help Out scheme, has given the industry a massive and much-needed short-term boost.

“While many bosses in the industry have essentially written off this year, it is pleasing to see they are feeling more confident in the run up to winter and into next year.

“Despite the headwinds and uncertainty, this is a highly resilient sector that hasn’t stood still. To fulfil their long-term growth ambitions, companies used the lockdown period as an opportunity to innovate and refresh their business models and adopt new technology.

“Hospitality and leisure is full of smart, inventive, resourceful leaders who will ensure the future is bright and the present is as good as it can possibly be.”

Time to learn

More than a fifth (22%) of hospitality and leisure businesses have made upgrades to their websites to help accommodate more digital sales, Barclays' research found.

A quarter (25%) of pubs have opened up food preparation areas to be more visible to customers and 20% of bars said they had moved to a ‘dark kitchen’ format where food is prepared off-site.

Brewhouse & Kitchen chief executive Kris Gumbrell said: “Lockdown might not have been a time to earn, but it was definitely a time to learn.

"It gave us the opportunity to try new things and futureproof the business. In just three months, we introduced new takeaway and home delivery services, created a new mobile website, upgraded our outdoor spaces and expanded into gifting with our own range of mini-kegs.”

When it came to rent, 26% of leaders in the study said they would be having conversations with landlords about it with 18% asking to move to a turn-over based model, 16% seeking to extend payment terms for backdated rent, 15% requesting to move away from upwards-only rent reviews, 13% offering landlords shares in the business in exchange for rent and one in 10 (10%) moving towards a shared ownership scheme with landlords.