Spring Statement a 'bitter blow' for sector

By Rebecca Weller contact

- Last updated on GMT

Operators disappointed with Spring Statement: Chancellor's statement a "bitter blow" for sector
Operators disappointed with Spring Statement: Chancellor's statement a "bitter blow" for sector

Related tags: Legislation, Vat, Finance, Rishi Sunak

Rishi Sunak’s Spring Statement yesterday (Wednesday 23 March) a “bitter blow” for the sector as operators express disappointment with the Chancellor as he could have done more to ensure sustainability in the industry.

Sunak announced a fuel duty cut of 5p with effect from 6pm yesterday until March 2023, an increase of the threshold for National Insurance​ from £9,568 to £12,570 and an increase of Employment Allowance from £4,000 to £5,000 as well as a temporary 50% Business Rates​ relief for eligible businesses up to £110,000.

However, the Chancellor remained silent​ with regards to the reduced rate of VAT, meaning an increase from 12.5% to 20% in April.

Greene King​ chief executive Nick Mackenzie said: “While the Government has taken some important steps to address the cost-of-living crisis, including the very welcome cut to fuel duty, we feel the measures announced in today’s Spring Statement do not go far enough to support pubs.

“We’re disappointed the Chancellor failed to reverse the VAT rise for the hospitality sector, which is a bitter blow for UK pubs still struggling to recover following the pandemic.

Missed opportunity 

“Coupled with rising prices across the supply chain, and disproportionately high business rates, today’s VAT hike is a missed opportunity for the industry and puts at risk the ability of UK pubs to fully recover from the pandemic, create jobs and support the wider economy.”

While the Spring Statement pledged to "help people now", with the cost-of-living at a 30 year high, ongoing supply chain issues, employment crisis and the chancellor having stated “we should be prepared for the economy to worsen significantly", operators expressed concern for consumer spending.

Licensee of the Unruly Pig, Suffolk, Brendan Padfield said: "Whilst our sector is the third largest employer in the UK, unemployment is at all all time low with hundreds of thousands of vacancies in hospitality.

"But even more worrying, is the Office for Budget Responsibilities view the UK now faces the largest fall in living standards since the 1950’s. That will result in a massive reduction in discretionary spend [and], in turn, will very seriously impact upon our sector."

However, the Chancellor also confirmed in his Statement the UK economy was expected to grow by 3.8% this year, according to the Office for Budget Responsibility, but the war on Ukraine​ posed economic threat to Britain and Russian sanctions were not “cost-free” with the potential for energy bills​ to rise by a further 40% if wholesale gas prices remain the same.

St Austell Brewery​ chief executive Kevin George said: “Recovery of the hospitality sector has been a priority as restrictions have eased.

“Undoubtedly, costs have risen exponentially for businesses given the ongoing situation in Ukraine, and rising inflation, energy and fuel costs present a significant concern, meaning further financial support in these challenging times is crucial.

“We are therefore disappointed the Government has decided not to extend the 12.5% rate of VAT​ today, and it will return to 20% next month. We would urge the government to provide further long-term support to Britain’s pubs and breweries by addressing the overall tax burden businesses now face.

“This will enable the hospitality sector to rebuild and help businesses like ours play a role in accelerating the UK’s economic recovery.”

Disappointment 

Sunak’s silence on the rate of VAT follows months of campaigning to ensure the reduced remained in place by trade bodies​ across the sector, including UKHospitality, the British Beer & Pub Association and an inquiry by the All-Party Parliamentary​ Group for Hospitality and Tourism.

Carlsberg Marston's Brewing Company chief executive officer Paul Davies said: “We welcomed the support the Chancellor provided to our industry during the pandemic, however we are disappointed the Government has decided not to extend the 12.5% rate of VAT.

“Pubs and breweries play a vital social, cultural and economic role in Britain and should not be taken for granted. This was an opportunity for the Chancellor to do more to ensure a sustainable recovery for the beer and pub sectors.

“With rising energy costs, the burden on the brewing and hospitality sectors has only grown since the pandemic. The unfair tax burden on pubs and brewers needs addressing and alcohol duty reforms need to be brought forward alongside a permanent reduction to VAT rates.

“This would not only support the creation of more connected and vibrant communities, but also encourage local investment and employment. These are essential steps if our rich pub and brewing heritage is to truly thrive.”

Related topics: Legislation

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