It’s unusual for a fifty minute budget speech to provide edge-of-the-seat viewing, but Rishi Sunak’s budget yesterday afternoon gave us just that. Not because it was Cup Final levels exciting (it was just as dull as most Chancellor speeches) but because we all had skin in the game. And few more-so than hospitality.
The hospitality sector has been in the eye of the economic storm wrought by coronavirus. Restaurants, pubs, bars, hotels, clubs and venues have spent the majority of the past year with the doors firmly locked shut. And not in a fun pub lock-in sort of a way either.
For their part, the government promised to do ‘whatever it takes’ and, more or less (if often erring on the side of less), fulfilled on their part of the bargain, with grants to hospitality, the furlough scheme, business rates holidays and new rules around evictions. However, as we near the end of the pandemic (hopefully) as well as the sunset clauses in most of that legislation, hospitality had started to wonder what Rishi Sunak’s budget would bring.
The government promised to do 'whatever it takes' and, more or less, fulfilled on their part of the bargain...
And the budget was a mixed bag. For anyone working the important roles at the bottom end of hospitality there’s a minimum wage increase to £8.91, though given you’ve possibly been furloughed for the past year on 20% of your normal wage, the 2.2% won’t be as significant as getting your normal salary back!
Linked to wages, one of the big headlines of the announcement is the extension of furlough. The scheme was due to end in April but has now been extended until the end of September.
This backtrack, flagged ahead of the budget, will allow hospitality some breathing room to get back to capacity before the furlough cliff-edge. By which time it’s hoped that businesses will be in a financial position to take back employees. It’s also perfectly possible that this deadline could again be extended or tapered as the situation progresses.
Though layoffs could come sooner as employers will be expected to pay 10% toward the scheme in July, rising to 20% in August and September.
Away from furlough, hospitality will be eligible for a new £5bn ‘restart grant’ of up to £18,000 per business. As with other grants, this will be based on the value of the property.
This backtrack, flagged ahead of the budget, will allow hospitality some breathing room to get back to capacity before the furlough cliff-edge...
The business rates holiday, enjoyed by businesses since the start of the pandemic, will be extended until June before being reduced by up to two thirds for the remainder of the financial year. Again, this should help take the edge off for many small businesses. Though most are unlikely to be at full-pelt as early as June.
Elsewhere, alcohol duty and fuel duty, who important factors for the hospitality industry, were frozen in the budget. And even if you’re not in the trade, I think we can all celebrate these freezes.
Ever fancied owning a pub? An interesting scheme will now be funded by the treasury to give communities the chance to save local pubs with a £150m Ownership Fund.
The final headline-grabber was the continued VAT freeze. The current 5% rate, due to expire at the end of this month, has now been stretched through to the end of September and will then not bounce back to 20% but spend another six months at 12.5% (which will make managing the books fun, but is still very welcome).
Not necessarily relevant to small businesses, but corporation tax is also forecast to rise from 19% to 25%. This won’t kick in until 2023 and will be tapered so that only companies with more than £250,000 or more in profit will pay the full rate and anyone with profits at £50,000 or less will continue to pay the current rate. And in any case, cynics expect that this tax rise may be cancelled at a later date, economy willing, as a pre-election sop from the Chancellor (who is fancied as a future PM himself).
Other general schemes will also impact hospitality, the cash incentive to take on apprentices will double to £3,000, for example. But the real decider on hospitality’s recovery, and indeed the economy’s, will be how quick we can return to ‘normal’ and how confident our spending is when we do. Has Rishi Sunak done enough to power a V-shaped economy? Time will tell…