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Here are the real costs of Covid restrictions on UK hospitality and how to save the sector

Prepare for a shock as we reveal the real costs of Covid restrictions on UK hospitality, and what it will take to save the sector from “financial oblivion”, following an in-depth report by the Independent Business Network (IBN) released this week.

The IBN Report: A strategy to save Britain’s hospitality and high street economy

In a detailed piece of analysis unveiled on Tuesday by the IBN, it’s been shown that restrictions on trading for Britain’s bars, pubs and restaurants by the UK Government has led an “economic collapse” for the sector, amounting to a revenue loss of £53.3bn.

Such a drop accounts for roughly one third the overall slump in the UK’s GDP, points out the IBN, highlighting the scale of the decline, as well as the importance of pubs, bars and restaurants for the nation’s economy.

Noting that the hospitality industry is responsible for over three million jobs in the UK, the IBN is urging the Chancellor to implement a “radical £35bn set of measures to safeguard 500,000 jobs” and save Britain’s ailing pubs, restaurants and local high streets “from financial oblivion”, following successive lockdowns and a pre-existing decline in footfall.

Among these is a re-introduction of the ‘eat-out-to-help-out’ scheme and the suspension of business rates for a further 12 months.

A key priority, the report’s authors argue, is the introduction of a rebate for the Covid-19 safety equipment purchased on mass by pubs and restaurants, which, as previously reported by db, is believed to have cost venues £10,000 each, on average.

The IBN argues that in many cases these investments were made on the basis of the tenor of the Government’s announcements at the start of the initial lockdown that, once the spread of the virus had been curtailed, the hospitality sector would reopen.

Instead, as the report states, “The end of the first lockdown merely heralded a period of further Government-led confusion and sporadic convulsions back into lockdown.”

It continues, “Venues had made significant investments on the basis of misleading and inaccurate Government advice for equipment that was largely redundant.”

As a result, it suggests, “The compensation rate for these venues should be set at a maximum of £10,000 per individual pub and restaurant, with provision made for a potential 69,000 claimants. In sum, this rebate programme would cost £690m.”

But that’s just one element of the £35bn package required to save the sector.

Indeed, the IBN has called on the Government to implement a swathe of measures, including halving the amount hospitality venues pay in alcohol duty and extending the suspension of business rates for a further 12 months.

It is also asking for the existing reduced VAT rate of 5% for the hospitality sector to be maintained while extending it to include sales on alcohol.

Meanwhile, it calling for steps to level the playing field between high street retail and online.

The full list of measures set out in the relief package for the hospitality and high street sectors and their respective costing include:

  • Provide hospitality businesses with a COVID-investment rebate – £690m
  • Extend hospitality’s reduced VAT rates for remainder of 2021 – £6.3bn
  • Include alcohol in hospitality’s reduced VAT rates – £750m
  • Cut in half Britain’s alcohol taxes – £1.8bn
  • Make hospitality investments 100 per cent First Year Allowance (FYA) – £1.15bn
  • Continue the suspension of business rates 2020/2021 – £15bn
  • Cut VAT rate payable by physical retailers to 14 per cent – £7.6bn.
  • Freeze town centre parking fees – £872m
  • Reintroduce ‘eat-out-to-help-out’ and complement it with a ‘pro-hospitality’ advertising push – £1.08bn.

Notably, the authors of the report argue that in many cases the fate of the hospitality sector is intimately linked to the future of Britain’s high streets, and that’s because a strong retail presence increases footfall for the hospitality businesses, while the availability of pubs and restaurants encourages customers to participate in retail shopping.

To simultaneously rejuvenate the family run businesses that dominate both the hospitality and high street retail sectors, the Chancellor should “level the playing field between the high street and online retail”, states the report.

It is calling for the rate of VAT payable by retailers with a physical retail presence to be cut to 14%, while also extending the abolition of business rates in the 2021 Budget for a further year.

Meanwhile, the Government is called upon to undertake a consultation process with businesses, local authorities and business associations to replace the current business rates model by the time of the 2024 general election.

The report also calls for the freezing of parking charges for 2020-2021 – at a cost of £872m – and to only allow a 1% annual increase for the next five years for car parking, parking permits, and associated fees while putting in place measures for further consultation.

Lastly, the report calls for the reintroduction and expansion of the ‘eat-out-to-help-out’ scheme to include sales on alcohol and to complement it with a nationwide ‘pro-hospitality’ advertising campaign.

Commenting on the publication of the report, chairman of the Independent Business Network, John Longworth, said: “The comprehensive £35bn package of measures we have set out here today are vital to saving our pubs, restaurants and high streets from financial ruin.”

Continuing, he said, “We urge the Government to adopt them and save up to 500,000 jobs and countless family run businesses from destitution.”

He added, “After all, the parlous state our hospitality industry is facing is a symptom of the Government’s own actions.”

The key points and associated costs in the IBN report are summarised below:

  • 500,000 jobs are under threat due coronavirus restrictions on the hospitality sector
  • One third of the UK’s overall decline in GDP can be attribute to the economic collapse in Britain’s hospitality sector, which is responsible for more than three million jobs.
  • The IBN is suggesting the UK Government halve alcohol duty and scrap business rates in a £35bn package to rescue 500,000 jobs and Britain’s pubs, restaurants and high streets from ‘irreversible decline’
  • As part of this, the IBN are calling for the UK Government to:
  1. Extend hospitality’s reduced VAT rates for the remainder of 2021 – £6.3bn.
  2. Include alcohol in hospitality’s reduced VAT rates – £750m.
  3. Halve Britain’s alcohol taxes – £1.8bn.
  4. Cut VAT rate payable by physical retailers to 14 per cent – £7.6bn.
  5. Freeze town centre parking fees – £872m.

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