New September ‘cliff edge’ set for hospitality

By Jo Gilbert

Published: 04 March, 2021

The Chancellor has yet again set a date-based cliff edge for the hospitality industry with a new date for the end of furlough, analysts have said, predicting that this could hamper the sector’s chances of full recovery.

Though the extension to the furlough scheme to 30 September and the duty freeze on alcohol for the second year in a row at yesterday’s Budget has been welcomed by many, Chancellor Rishi Sunak has come under fire for a lack of a phased out approach of support for reopening.

According to accountancy firm Blick Rothenberg, the Chancellor could have set out a road map for furlough that is sensitive to the needs of different sectors and the ways in which they are likely to be impacted by the pace of economic recovery.

This is especially true for the hospitality sector, the firm reasoned, as it will take some time for consumers to return to high streets, restaurants and bars, which are likely to be impacted with social distancing measures for some time to come.

“Seasonal businesses who are unable to have a normal summer period will not be able to sustain full time employment once furlough ends in September,” Andrew Sanford, parter at Blick Rothenberg, said. “These businesses may have to make some very serious decisions, especially with additional contributions [to furlough top up] due in July to September.”

Others have also taken aim at the increased employee contributions for the furlough scheme from July, with the SLTA (Scottish Licensed Trade Association) predicting that this will cause severe difficulties for many.

“The furlough extension is, of course, to be welcomed. But the costs incurred after employers are asked to contribute 10% in July then 20% in August and September may be prohibitive for some at a time when many are struggling to survive and waiting to see when hospitality can start to open up north of the border,” SLTA media spokesman Paul Waterson said.

In yesterday’s Budget, a number of financial support initiatives were unveiled. This included re-start grants of £18,000 for hospitality businesses, a business rates holiday extension to the end of June and another extension for VAT rates in the sector which will stay at 5% until September 30, and only rise to 12.5% for the six months after that (though only for food, not alcohol).

Many have welcomed this news as it will help to support businesses during what is likely to be a long and drawn out reopening of the industry from the government’s planned date of 21 June.

Others are now looking ahead to the alcohol duty review, the results of which is due to be published some time later this year.

Dayalan Nayager, managing director at Diageo Great Britain, thanked the Chancellor for providing “much-needed stability” by freezing alcohol duty.

“The last year has been incredibly tough and [yesterday’s] decision, along with other measures to help the trade, gives the industry confidence to meet the ongoing challenges in these critical last months before reopening. We now look ahead to the Alcohol Duty Review and welcome the opportunity to work with Government to bring greater fairness to the duty system and spirits producers across the UK,” he said.

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