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What the Budget Means for Restaurants

Chancellor Rishi Sunak announced a new package of support in Wednesday’s Budget, including extensions of the 5 percent VAT rate, the business rates holiday, and the furlough scheme

The Chancellor Of The Exchequer Delivers The 2021 UK Budget Photo by Karwai Tang/Getty Images

Chancellor Rishi Sunak used his Budget today, Wednesday 3 March, to announce that the VAT tax cut and business rates holiday that have bolstered restaurants’ chance of survival will be extended. He also confirmed the extension of the furlough scheme and a new set of grants for hospitality venues — measures designed to dovetail with Prime Minister Boris Johnson’s reopening “roadmap,” which will see hospitality venues remain closed until 12 April and not fully open without restrictions until June.

Below is a summary of the measures relevant to restaurants, pubs, bars, and cafes announced by the chancellor in the House of Commons this lunchtime. In short, it is broadly what was hoped for, if not expected.

VAT Cut

  • The much-valued 5 percent VAT rate on food and soft drinks (not alcohol) is extended for six months, until 30 September.
  • From October, businesses will have to pay a 12.5 percent VAT rate for six months.
  • A return to standard rate of 20 percent will take place in April 2022.

Business rates

  • A continuation of the business rates holiday — a tax applied to the value of a property — until June 2021
  • Business rates will then be charged at 33.3 percent (at two-thirds’ discount of their pre-pandemic level) until the end of March 2022, up to the value of £2 million. A lower cap will be applied to restaurants which have been able to stay open.

Alcohol duty (tax)

  • A planned increase in duty on beer, wine, and spirits will be frozen for another year, meaning that pubs and restaurants are not technically set to save money on alcohol sales.

Furlough scheme

  • Confirmation that the Coronavirus Job Retention Scheme (CJRS) — (widely referred to simply as “furlough”), introduced last March and a key support mechanism for restaurant owners and their workers throughout the pandemic — will be extended until the end of September.
  • The scheme will remain unchanged for the months of May and June — with the government covering 80 percent of the wages, up to the value of £2,500 per month, for those unable to work because of the pandemic (with the exception of the costly National Insurance and pension contributions.) For the month of July, the government will ask employers to contribute 10 percent of that 80 percent, rising to 20 percent in August and September.

Covid Grants

  • A package of “restart grants” worth between £8,000 and £18,000 per premises to assist restaurants, pubs, bars, and cafes which will begin their phased reopening after lockdown from 12 April.
  • The grants will be allocated to businesses based on the value of its property: Properties with a rateable value (that is the estimated annual rent) of £15,000 or under will receive £8,000; for those worth between £15,000 and £51,000, the grant is £12,000; and those with a value of £51,000 or over will be eligible for a grant of £18,000.

Business Loans

Rent

  • Nothing yet on the biggest cost and the biggest worry for restaurants, pubs, cafes, and bars.

Trade body U.K. Hospitality broadly welcomed the Budget, saying that “The Chancellor has listened to the concerns of the hospitality sector. Details are yet to be pored over but it looks like crucial support will help businesses at a critical time.” Rather than pushing for further support in recent weeks, it has instead focussed on maintaining current support and pushing for reopening dates to remain fixed come what may.

More soon.

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