Industry disappointed by Sunak’s spring statement

The hospitality industry has been left deflated following the chancellor's spring statement, which was delivered to parliament on 23rd March.

While Rishi Sunak unveiled the government's new tax plan in a bid to ease the UK's growing cost of living crisis, industry leaders were left frustrated by the silence on VAT. Much of the industry had been hoping for the government to maintain the reduced rate of 12.5% on food and soft drinks, particularly because of the growing momentum of the sector's #VATsEnough campaign.

"This is a real setback for thousands of UK hospitality businesses still suffering the devastating effects of Covid, and facing a tidal wave of rising costs," said Kate Nicholls, CEO of UKHospitality. "For many businesses, the removal of the lifeline of a lower rate of VAT might prove fatal. For a heavily, disproportionately taxed sector a return to 20% dashes the hopes that many businesses could begin to recoup some of the losses of the last two years."

What Sunak did announce was plans to boost business investment, innovation and growth across the UK. He has increased the government's employment allowance – a relief that allows smaller businesses to reduce their national insurance contributions (NICs) bills each year – from £4,000 to £5,000 as part of the strategy. He says the cut is worth up to £1,000 for half a million smaller businesses, starting on 6th April. 

The chancellor said he will examine how the tax system, including the Apprenticeship Levy, can be used to encourage employers to invest in adult training, with the UK currently spending half the European average on employee training. 

"The increase in the NIC threshold for employees is a very positive move and will boost disposable income, although extending that measure to employers would help hospitality businesses to recruit and retain talent," said Nicholls.

Sunak confirmed a 50% business rates relief for eligible hospitality, leisure and retail properties with a cap of £110,000 per company, which will also come in in April. 

John Webber, head of business rates for Colliers, added: “It was disappointing that the elephant in the room, business rates, was largely ignored, despite the impact that ultra-high rates bills has had on businesses in recent years.

“The chancellor reiterated the 50% business rates discount for the retail, leisure and hospitality sector as of April 1st, but with a cap of £110,000 per company, this will only support the smallest businesses in the sectors and will do little to help the larger companies who account for the majority of jobs. Any support to businesses in other sectors of the economy was also totally lacking.

“Retailers and other high street operators will be now considering their business plans now for next year and looking closely at their future business rates liabilities, particularly when the Covid-related reliefs come to an end. It is essential the Chancellor provides reassurance that rates bills next year will immediately reflect the lower rents we are seeing in the market now -providing incentives for businesses to keep or expand space and for property investors to invest in the sector across the UK.” 

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