While the decision to extend the 75% discount for retail, hospitality, and leisure businesses for a further year has been unanimously welcomed by operators and trade groups, many had been hoping for further targeted relief to help business struggling with the myriad of financial challenges facing the sector.
“More could have been done to support such an important industry to the UK economy,” says Philip Harrison, chairman of specialist brand, interior and architectural design agency Harrison.
“While there is positive conversation around the economy turning a corner, we know that levels of uncertainty remain high in the hospitality sector. While turnover grows for many businesses, profits do not, leading to business owners being much more reserved when it comes to investing in their businesses and the wider community.”
Pressure on hospitality remains high
Alongside an extension to the rates relief, Chancellor Jeremy Hunt announced in his Autumn Statement that the freeze on the small business multiplier would be extended for a further year, with the Government saying this will protect around 90% of ratepayers for a fourth consecutive year.
However, he added that the standard multiplier will rise, meaning those businesses whose property has a rateable value of £51,000 or more will see their business rates bills increase by 6.7% next April, in line with September’s headline rate of inflation.
“The decision to freeze the small business multiplier will help those most vulnerable keep the lights on,” says Kate Nicholls, chief executive of UKHospitality.
However, she adds that the standard multiplier rising by 6.4% will see businesses representing almost two-thirds of the sector’s trade still facing a £150m rates hike.
“This will only put more pressure on consumer prices and inflation, at a time when businesses are still grappling with high costs of energy, food, drink and wages.”
Among the other proposals announced in the Autumn Statement was a further six month freeze on alcohol duty until August next year. There was also a commitment to reform the planning system in order to allow for faster planning applications.
“We’re pleased that the Chancellor has also acted on our proposal and frozen alcohol duty until August next year,” Nicholls continues. “This is now one less cost venues have to worry about. With duty frozen, this should substantially constrain any cost increases passed on by drinks producers.
“Reforms to the planning system to drive quicker planning approvals will remove a significant barrier to business investment. This type of reform to reward the best performing local planning authorities is exactly the type of change we have been suggesting to drive growth in hospitality.”
Solidarity for SMEs
Elsewhere in the Autumn Statement, it was confirmed that the National Living Wage would rise by almost 10%, from £10.42 to £11.44 an hour, in April next year.
Meanwhile, a 2% cut to Employee National Insurance, from 12% to 10%, will be introduced, coming into effect from January 2024. However, employer contributions to National Insurance will not be cut.
The decision to raise the National Living Wage had already been trailed ahead of the Chancellor’s statement, with Loungers chairman Alex Reilley warning that the wage increase could push countess small hospitality businesses ‘over the edge’.
In an further statement published on X (formerly Twitter) following the Autumn Statement, Reilley condemned the lack of additional support offered to such businesses in the sector, labelling it ‘a farce’.
“At the very least the Chancellor could have cut employers [National Insurance] in line with the cut to employees NI to go some way to helping SME’s being able to afford their payroll costs from April ‘24 and stay afloat,” he said.
“All of this on top of being forced to take out Covid loans (that are now subject to higher interest rates) just to stand a chance of survival and then being mugged right under the watchful eyes of the [Government] by greedy energy providers.
“There are some fabulously talented hospitality entrepreneurs out there who have put it all on the line, invested their savings and, through hard work and ambition, created brilliant businesses. But really, how are they going to survive?
“If I was dealing with this 15 years ago when Loungers was an SME, I doubt we’d have made it through. How many businesses that could, in years to come, be creating nearly 1,000 new jobs a year and investing over £30m in new sites (like Loungers is now) will fail?
“The sector needs to stand up and show solidarity with our SME’s – hospitality is about looking after people and each other and having an ‘I’m-alright-Jack’ philosophy simply isn’t good enough.
“Our trade bodies need to either do more or take a different approach because whatever they are doing at the moment simply isn’t working.”
A ‘perfect storm for closures’
Other operators to voice frustration following today’s statement include Gary Usher, founder of Elite Bistros.
Posting on X, he said: “The lack of support today from the Government means most independent hospitality businesses will have to make redundancies, close services, and source inferior produce.
“It’s a perfect storm for closures.”
Stosie Madi, chef-patron of the Parkers Arms in Lancashire, echoed Usher's words in her own post.
“Thank goodness for the business rates relief, but sadly without the reduction in VAT some business may well not have to pay any rates because they simply won't make it,” she said.
The Chancellor announced in his Autumn Budget last year that VAT would be frozen at 20% until 2026, but operators and trade bodies have continued to call for it to be reduced.
Speaking ahead of the Autumn Statement, Nicholls said: “In the longer term, stronger consideration needs to be given to a lower rate of VAT for hospitality to create a more sustainable tax burden for a sector that employs 3.5 million people and delivers £93bn to the economy.”