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Restaurants and Pubs Want More Than a Mini Budget

High earners will have more money for Michelin-starred blowouts, but restaurant owners want to see a return to a lower rate of VAT — a measure that rescued many during the COVID-19 crisis

Chancellor Kwasi Kwarteng on his way to deliver the budget.
Aaron Chown/PA Images via Getty Images

Restaurants and pubs have reacted to new Chancellor Kwasi Kwarteng’s so-called mini-budget with dismay. Aside from the previously announced energy price discount for businesses, today’s measures include massive tax cuts (totalling £45 billion) and deregulation aimed at stimulating economic growth, the government says. Hospitality bosses believe the measures do little to help small businesses who are being whacked by rising costs and face uncertain demand going into the autumn.

Restaurant trade body boss Kate Nicholls of U.K. Hospitality said the mini budget failed to meet the industry’s specific needs. “The Chancellor committed to making the U.K a globally competitive tax regime, yet overlooked two obvious levers to achieve that, through lower VAT and business rates reliefs,” she said. “Our VAT rate is the highest in Europe, which is starkly at odds with ambitions for global tax competitiveness and will hopefully be addressed in the autumn Budget, if not before.”

It is VAT which remains top of the wishlist for restaurants and pubs — a measure which provides an immediate cost saving, assists cashflow, and which came to the rescue of many businesses limping through the successive lockdowns during the COVID-19 crisis.

Elsewhere, Steve Alton, chief executive of pub trade body, the British Institute of Innkeeping felt that the measures announced today’s mini budget were inadequate. It failed to “address the vulnerability of our members’ pubs in every community,” Alton said. “We will continue to engage and make the case to Government for our members as they conduct their review into vulnerable sectors with the Prime Minister having previously referenced our local pubs. Simply without further support many pubs will fail.”

Perhaps the most scathing comments came from Andrew Crook, president of the National Federation of Fish Friers, the body representing fish and chip shops in the U.K. “Sadly, the government have not done enough to support small independent businesses. They have put bankers above bakers and financiers over fish friers,” Crook said. “A lot to digest, but with lower taxation on profits, there is an implication that we are going to show a profit. That is extremely unlikely for the vast majority of my members.”

But there was some cautious support in some quarters — notably, big business hospitality. Nicolas Burquier, managing director for Pizza Hut Europe and Canada said it was great to see government acknowledge and act on the “significant pressures facing the UK hospitality sector as a result of the rise in global inflation.”

“Combined with the recently announced support on energy bills, the tax changes and Investment Zones unveiled today, all will offer some much needed short-term respite for many hard-pressed restaurants and takeaway owners like our franchisees as we head into the winter,” Burquier said.

The measures come at the end of a week in which the Bank of England increased the interest rate from 1.75 percent to 2.25 percent, which prompted Nicholls to caution that it would “exacerbate the already challenging trading environment” for restaurants. Indeed, the crises, which have now been a mainstay for the last two and half years, show no sign of slowing down for hospitality businesses in London and the rest of the U.K.