Positives to be found in Budget announcements

The key announcements for the sector:

Business rates relief: From April 2019, retailers in England with rateable values of £51k or less will see their business rates cut by a third for the next two years. It is estimated this will result in an annual saving of up to £8k for up to 90% of independent pubs, restaurants, and cafes.

Duties: Beer, cider and spirits will see duties remain frozen, however wine will be subject to RPI increases. Fuel duties will also remain frozen.

National Living Wage: The level will increase from £7.83 an hour to £8.21.

Personal allowance: This will increase for employees to £12,500 in April – a year earlier than planned, and will be maintained in 2020.

Apprenticeship Levy: From next April, large businesses will be able to invest up to 25% of their apprenticeship levy fund to support apprentices in their supply chain.

In addition, smaller employers will see the amount their contribution halve, from 10% to 5% - with the remainder funded by the government.

High street boost: Local high streets are set to benefit from £675m, for a Future High Streets Fund, to improve transport links and re-develop empty shops as homes and offices.

National Minimum Wage: It will be increased for 21-24 year-olds to £7.70 in April; 18-20 year-olds will see it increase to £6.15, and 16-17 year-olds, to £4.35. Rates for apprentices will increase to £3.90.

Plastic tax: A tax will be introduced on the manufacture of plastic packaging that contains less than 30% recycled plastic.

Latte levy: A blanket tax has been rejected. The Chancellor said he believed a tax in isolation would lead to a decisive change from disposable to reusable cups, but that the situation would be monitored.

 

The reaction:

Peter Marks, chief executive of The Deltic Group, told MCA: “In summary this was overall a budget that has tried to help small businesses and start-ups so there was some good news for those that fall into this category but not much to help, or indeed hinder, The Deltic Group. But there were a couple of useful benefits that at this moment in time I cannot quantify, but they are to be welcomed.

“Onto the specifics – I think there was a recognition of both the contribution and the challenges the high street faces, so I welcomed the news on rates generally, but it will not help any of the Deltic businesses as only two would fit into the rateable value of less than £51k. The duty freeze on beer cider and spirits is of course helpful to us all. The NLW rise of 5% will have a lesser impact on our business than many, as many of our staff are under 25, but that said we are always having to pay local market rates in any case.

“Keeping entrepreneurs relief has to be welcomed, even if the qualifying period is now 24 months – this encourages start-ups and investment and again adds to a healthy night time economy. And the treatment of capital losses in the same way as income losses is to be welcomed and will help us, as sometimes capital losses can rack up and no gain comes along to offset the losses for years!

“I was hoping to see police budgets increased, as I believe that the stretch on resources has unintended consequences for all, as stretched resources have changed the way we work with the police, and a lot of experienced police licensing professionals have been cut. There is some kind of review, but they rarely lead to any radical changes quickly. It is merely kicking the can down the road.”

Ted Kennedy, veteran pub entrepreneur and chairman at Dominion Hospitality and Pebble Hotels, told MCA, that his view would be that Hammond gave it a good shot, “but in truth most budgets have very little real impact”. “And this one, given we all know that it will need to be revised depending on whether we fall off a cliff or cling onto it in Match 2019, has even less traction. Who knows who the government, will be let alone who the Chancellor will be.

Rates is a train crash and the low RV he has flagged means it won’t have any role with bigger pubs which just distorts the market. The poor old tenant in a marginal pub may cling on for a bit longer but it will not make them viable long-term,” he said.

Kennedy added: “Is keeping NLW down a positive or a negative given the inequalities in society? Now that could be a great question for politics students. At the end of the day the strong survive and the weak don’t.”

The associations responded to the Budget with relative positivity. UKHospitality welcomed the support given to hospitality businesses but called on the government to follow-up with continued dialogue and backing for hardworking businesses.

Chief executive Kate Nicholls said: “This was a positive Budget for hospitality, recognising and acknowledging our core campaigns around employment costs, business rates and digital paying its fair share – together with a positive outcome on excise duty, latte levy and non-residential capex and investment allowances. We estimate the measures announced in the Budget as a result of our campaigns are likely to save the trade £750m.”

She said the steps to address spiralling business rates were welcome, and that is was positive to see the government listening.

“Cutting bills for smaller businesses by a third will provide some much-needed support and is a positive move by the government. This, along with the introduction of a new tax on digital businesses, to ensure they pay their fair share, needs to be a springboard for further businesses rates reform,” said Nicholls.

“The funds raised by this new tax should be used to ease the unfair tax burdens being shouldered by hospitality businesses to help stop the continued devastation of high streets.”

Brigid Simmonds, chief executive of the British Beer & Pub Association, understandably welcomed the move to freeze beer duties.

“Pub-goers across the UK will be toasting the Chancellor tonight following his decision to freeze beer duty. This early Christmas present will save brewers, pubs and pub-goers £110 million and secure upwards of 3,000 jobs that would have been lost had beer duty gone up.

“This is a big step in the right direction and a huge help for pubs across the UK that are struggling. I hope we can continue to build on this success in the future and we will continue to celebrate the vital role that local pubs play in communities and highlight the ongoing pressures they face by supporting the Long Live the Local campaign.”

Simmonds added: “The announcement that the contribution by small businesses for the Apprenticeship Levy will decrease from 10% to 5% is also very good news for pubs. Likewise, so is the increase in investment allowance from £200,000 to £1 million.

“These decisions are particularly welcome in light of the additional cost pressures facing pubs, such as increases in the national minimum wage and the previously announced increase in the climate change levy.”

Laith Khalaf, senior analyst, Hargreaves Lansdown, said the Chancellor hadn’t rocked the fiscal boat with this Budget – “not entirely surprising given the Brexit storm clouds gathering and the mutinous mutterings from below deck”. “Indeed he’s left the door open to checking the compass again in the new year, and changing course with a Spring Budget if needed.

“Bringing forward the manifesto pledge to boost the personal allowance and higher rate threshold will raise a cheer from millions of taxpayers, as will freezes to duties on beer, cider and spirits. Wine drinkers will have to quaff back the usual inflationary tax increases though.

“Cuts to business rates for smaller high street premises will be welcomed by shopkeepers, but it’s not going to deliver a dividend for the big department stores where store closures and job losses can unfortunately still be expected. These companies do at least have the resources to invest in their online proposition to compete in a digital age, even though they arrived pretty late at this particular party, and are suffering the consequences.

“The OBR is still pretty downbeat on prospects for the UK economy, even if forecasts have been lifted since March. Growth for this year has been downgraded after a poor first quarter, but the economics watchdog expects a bounce back next year to growth of 1.6%. That’s still pretty lacklustre though, and is actually forecast to fall back in subsequent years. This paints a picture of an economy muddling through, and withdrawal from the EU clearly remains a risk in the immediate road ahead. This is simply a continuation of the current trend, where the UK remains in a low growth, low interest rate environment. £420 million spent on potholes isn’t going to dig it out of this rut, however a resolution on Brexit might deliver some much needed momentum.”