Business owners say that highly publicised price reductions from high street brands such as Pret, McDonald’s, JD Wetherspoon and Starbucks made as a direct result of the Chancellor’s reduction in VAT from 20% to 5% for the hospitality sector, is putting pressure on smaller businesses to follow suit - something which many say they can’t afford to do.
Gary Usher, who operates the Elite Bistros group of restaurants, said that independent restaurants like his own business would not be able to pay on the VAT reduction.
“You are going to see a lot more of your favourite places close permanently,” he wrote on Twitter. “It’s inevitable unfortunately. If you want a deal, with the greatest of respect go to McDonald’s. An independent doing deals, VAT reduction or not, won’t survive.”
Usher said this decision was not one made out of greed but of necessity, adding: “I’m not trying to pocket the 15% VAT. All six restaurants are about to go bust. We’re not the only ones. The industry is looking at millions of redundancies.
“We’ve taken all the loans. We’ve streamlined as much as possible. We haven’t let anyone go. Closed 4 months. We are going to open with quarter of the tables we had before. VAT reduction is a temporary help & will stop us going under for a few months. Most independents are the same.”
Alex Rushmer, chef-patron at Vanderlyle in Cambridge, is taking a similar standpoint. Writing on Twitter he said: “Re hospitality VAT cut: if you go out to eat and spend £25 on food it could save you just under £3. If the restaurant chose not to pass on the cut, it could save the restaurant and the jobs of everyone who works there.”
Larger groups are also saying that they do not intend to pass on the full reduction in VAT to their customers. Robin Hutson, founder and chief executive of Home Grown Hotels, which runs Lime Wood Hotel in the New Forest and The Pig group of hotels and restaurants, says he will be keeping the whole amount of the VAT reduction but would instead be donating £5 on every hotel booking until Jan 2021 to industry charities Hospitality Action and Action Against Hunger.
Alex Reilley, chairman of restaurant group Loungers, says the company is still deliberating on whether to pass any of the VAT onto customers. “We deliberately held prices on reopening,” he says. “We have always been value for money focused and we want to maintain that. We may pass some of it on be we are still undecided.”
D&D London chairman Des Gunewardena says his restaurant group would be passing on some, but not all, of the VAT reduction onto customers, saying that businesses needed to use the Government support to ensure their survival.