'This isn't a massive boost, this is just helping people get back on the road to recovery'

Last summer, the UK government instated a temporary VAT cut on hospitality businesses, lowering it from 20 percent down to five percent of sales to ease pressure on British businesses struggling as a result of the Covid-19 crisis.

 

On March 3rd, the Chancellor will unveil the budget for 2021, which aims to support the economy as it gradually emerges out of lockdown. It has been predicted that he will defer long-term tax and spending decisions, and extend wage subsidies beyond the end of April. 

Other measures could include a reintroduction of the Eat Out to Help Out scheme, which, despite evident flaws, led to a peak in restaurant dining when customer confidence wasn't a given, as well as a reduction in VAT - which has only been on food so far, but which some say should extend to alcohol sales as well - could support businesses as they reopen but must continue to operate under some restrictions for the foreseeable future. 

At face value, it may seem like a simple argument - but as the past year has shown, the need for eloquent government lobbying is an absolute must when it comes to supporting the industry - which is why we decided to bring together some of the most vocal supporters of an extension to the VAT cut to discuss the matter in detail: Andy Lennox, restaurateur and founder of Wonky Table; Michael Kill, CEO of the Night Time Industries Association (NTIA); award-winning chef and vocal advocate for the hospitality industry, Tom Kerridge; Kate Nicholls, CEO of UKHospitality; and Sacha Lord, Night Time Economy Adviser for Manchester. 

Ten days ago Andy Lennox launched a petition calling for the extension of the VAT cut, which has received close to 16,000 signatures at the time of writing. 

"We've all written hundreds of letters to government and MPs," he said, but with the petition, he hopes to bring more public awareness of the issues at hand and what can be done to resolve them. 

An exchange with Paul Scully - the Minister for London, small business, and the MP for Sutton & Cheam - concluded that an extension of the VAT cut until the end of 2021 and beyond was less than likely. This inspired Andy to double down on the campaign.

Why is the VAT extension so important? 

Kate Nicholls explained that the VAT cut "was granted to us in July as a means of stimulating demand, helping to repair shattered balance sheets and to support the recovery." 

"The anticipation was that we would recover and that we would get back towards normal levels of trading - not fully profitable, but normal levels - by the end of last year. 

"Clearly, with the hiatus that we've had, the disruption is even more important. All of those arguments remain just as valid."

Tom concurred, and said: "From an industry point of view, it was given in very good faith in terms of trying to regenerate growth and allow the hospitality industry to build on shattered balance sheets," but after multiple successive lockdowns, "it ends up just being words. They're just hot air. VAT is going to be five percent, but five percent of zero turnover is still zero." 

"It needs to be there for securing the future." 

"We all talk about hospitality jobs being lost and loads of closures," he said, but as it stands, "there haven't been lots of losses, and that is solely because the furlough scheme still exists and that scaffolding of support systems still exists."

"What will happen is, the moment that we can reopen, the moment that those support systems start getting removed, that is when businesses will start closing." 

If businesses aren't able to operate with such low profit margins, "it's going to be a slow death." 

"This isn't a massive boost, this is just helping people get back on the road to recovery." 

A roadmap to reopening

The panellists all agree that when non-essential retail is allowed to reopen, so should hospitality. 

Kate said: "It's all about standards and risk assessment," she said, and retail will need to level up to the same standards as hospitality for everyone to be able to reopen safely.

"That's how we should be approaching it - it's not about what type of premises you are, it's about behaviours, risk mitigation and health and safety."  

Clarity 

Another uniting point of conversation is that clarity is brought not only from a budgetary perspective, but in terms of the mindset under which policies are delivered. 

Kate said: "Dates are less important than the conditions under which you are opening and the phasing, sequencing and how long things last." 

"If somebody was to say: 'you can only open under these really strict conditions, or it's a month later and fewer conditions, it's a different question." 

For her this means a clear outline of on what the restrictions are, whether they are as tight as last July, and how long they are going to remain in place for. 

"It's equally important to have that end date," she said, aligned with the vaccination programme, and an understanding of how the phasing is happening. 

"Whether that is allowing more parts of hospitality to reopen as we go through or tapering off some restrictions. 

"But that's what we need from the route map."

Is there hope? 

Tentative predictions are much more likely come February 22nd and March 3rd, however, and none on the panel are confident that they will receive the assurances that they need.

"Ultimately we all want the same thing from the budget," Andy said. "We all want the same roadmap. I hear that they're going to set out the criteria for us to reopen, ie we want to see vaccines at x and R rate at y and once that happens we'll give you a date.

"We just need some time to plan - I can't understand why they can't see that."

Michael added that while the original announcement that a roadmap would be set out on February 22nd promised dates, "now it's been watered down again to a very short term stint of understanding what's going to happen in the immediate future, with caveats around hospitalisation, mortality, vaccination rollout etc." 

"It's a constantly changing narrative, and we need desperately this long-term strategy - even if it's a yellow brick road or a direction of travel." 

"It's very very difficult to regain confidence in an ever changing environment, and it's got to be addressed. 

"I appreciate that government are trying to be all-encompassing, but it's not working."

Without an extension of the VAT cut, what will the industry look like? 

Aside from the immediate 15 percent price increases, Andy said, "the biggest thing is that we don't know where we're going to be," meaning making decisions within the business is nearby impossible. 

"We like to trade - we don't want to have handouts. The five percent VAT is important because it means we're trading.

Looking at the bigger picture, Kate explained that the businesses which have been closed for a year are the most at risk, and that without the support, the fall-out will be massive. 

"Those are the quantum of the jeopardy that we've got unless we get this right," she said.

"If we get the support with VAT and business rates, it will bring forward hospitality's recovery, and therefore the economic recovery by nine months." 

"If we get it right, and we bring forward that recovery, then we will do for the country what we did out of the financial crash: £10 billion a year invested in our high streets, one in six of net new jobs created in all parts of the country at all skill level."

"We will help to repair the damage that has been done by the pandemic, but we can't do it if we're at half strength."