Chancellor launches scheme to get people back in restaurants and slashes VAT for hospitality

The tourism and hospitality sectors are huge employers in the UK, and have been severely impacted by the coronavirus pandemic.

80% of hospitality firms stopped trading in April, and 1.4 million hospitality workers have been furloughed – the highest proportions of any sector.

Restaurants and pubs are starting to reopen, and customers are starting to return, but slowly.

Data from hospitality specialist CGA suggests that 18,277 of a possible 40,575 pubs and bars that could have reopened over the weekend, did so, equating to 45.04%.

But businesses need to know that customer demand is there before they can reopen with all the necessary measures in place, and some are understandably nervous.

Delivering his Summer Economic Update in Parliament, Chancellor Rishi Sunak today announced a package of measures designed to support the hospitality industry and encourage diners to eat in restaurants and pubs this summer.

To encourage people to safely return to eating out at restaurants, the Government’s new ‘Eat Out to Help Out’ discount scheme (cue an avalanche of jokes about the name on Twitter) will give people 50% off sit-down meals in cafes, restaurants and pubs across the UK from Monday to Wednesday every week throughout August 2020, with a value of up to £10 per person.

Further details will be released soon, and the venues will need to register with the scheme.

The rate of VAT applied on most tourism and hospitality-related activities will also be cut from 20% to 5%.

From 15th July to 12th January, VAT will be reduced to 5% for supplies of food and non-alcoholic drinks from restaurants pubs bars and cafes. The cut will also apply to accommodation and admission to attractions, including cinemas, theme parks and zoos.

The Chancellor says this will support over 2.4 million staff at over 150,000 businesses, giving them the confidence to maintain their staff, as more people get through the door and business activity kick-starts again.

“I know people are cautious about going out,” Rishi said in the speech. “But we wouldn’t have lifted the restrictions if we didn’t think we could do so safely.

“I’ve seen in the last few weeks how hard businesses are working to make their premises safe. And if we follow the guidance, and respect what they ask us to do, we can all enjoy summer safely.

“In turn, we need to give these businesses the confidence to know that if they open up, invest in making their premises safe, and protect jobs, demand will be there, and be there quickly.”

The Chancellor described the VAT cut as “a £4 billion catalyst for the hospitality and tourism sectors, benefiting over 150,000 businesses, and consumers everywhere – all helping to protect 2.4 million jobs.”

The national voucher scheme “has never been tried in the UK before,” he said.

But what do national and regional operators think of the new initiatives?

Brewhouse & Kitchen, whose 22 sites including Wilmslow are set to reopen throughout this coming week and the next, hope the news will have a positive effect in helping to release its workforce from the furlough scheme.

“The ‘Eat Out to Help Out’ scheme announced by the Chancellor today is fantastic news for the hospitality industry,” says CEO Kris Gumbrell.

“This decision is a win-win for both the government and businesses by allowing our venues to remain open, thus enabling us to un-furlough and save the jobs of our team members along the way.

“Of course, the public will also see benefits from this decision as well, not only will they once again be able to enjoy our great food and craft beer, but they will be able to eat out with a possible 50% price reduction.”

Gary Usher, who runs bistros across the North West including Kala on King Street and Hispi in Didsbury, tweeted after the announcement: “Some really great news for hospitality. It’s making things feel possible.

“I feel really good. Really f***ing good. Positive for the first time in f***ing ages.”

Kate Nicholls, chief executive for UK Hospitality, tweeted: “Thank you to @RishiSunak recognising the importance of tourism and hospitality and the benefit it brings to economy – this will make a material difference for the sector as we face a long road to recovery.”

James Watt, head of Brewdog, tweeted: “We welcome the Chancellor’s announcement today on the VAT reduction to 5% for hospitality. We are going to pass on every single penny to our amazing customers.”

Also positive were the Parkers Arms team in Lancashire.

“Basically everyone get back to work and let’s get the economy moving again. Great news if it works right,” they tweeted.

Yessssss 5% Vat pic.twitter.com/U54A9babHS

— Parkers Arms (@parkersarms) July 8, 2020

“The hospitality sector will very much welcome the VAT cut from 20% to 5% until the 1st January. It will make a huge difference,” tweeted Sacha Lord, Night Time Economy Adviser for Greater Manchester.

“Also, 50% discount on restaurant/pub meals on a Monday-Wednesday during August, at a max of £10 per head is very much welcomed,” he continued.

“We must still remember the virus is still around though and all guidelines are remembered.”

Sacha also added that “whilst the new measures announced today are welcoming, it very much feels like they are neglecting the traditional pub, many who do not serve food. These are the ones who have been hit the hardest, many with smaller spaces and today’s announcement offers them no help.”

James Calder, chief executive of the Society of Independent Brewers, agrees that today’s announcement is a mixed picture for pubs.

“The job retention bonus and kickstart scheme will help beer, brewing and pubs given we employ a disproportionate number of young people,” he said.

“The temporary VAT cut to 5% and Eat Out to Help Out scheme will help encourage people back into the pub.

“But we’re very disappointed that beer, the UK’s national drink has been excluded from the VAT cut and the eating out scheme. Today’s announcements do nothing to directly help small, ‘wet led’ community pubs and independent craft breweries.”

And Centre for Cities, the leading think tank dedicated to improving the economies of the UK’s largest cities and towns, believes that more will be needed.

“While today’s package is substantial, it is very much about keeping our heads above water in the short-term,” said chief executive Andrew Carter.

“Several of the policies could have been broader in their scope. The ‘Eat Out To Help Out’ scheme will help the hospitality sector, but many other high street businesses are also struggling. I hope that the Government will monitor how the scheme is used and expand it to include other businesses if needed.

“The package may well shield many places from the worst effects of the recession, but returning to a pre-Covid normality will not be enough. If we’re to actually improve people’s life chances and spread prosperity across the country then the Autumn Spending Review will need to be bolder than today’s statement.

“To level up the country we need to see commitments on infrastructure spending, investment in innovation and planning reform to build the homes we need.”