What does the Spring Budget mean for hospitality?

What does Spring Budget 2017 mean for hospitality?

Chancellor Philip Hammond offered an olive branch to pubs facing rising business rates in today’s budget, but raised the price of a pint of beer for the first time in five years.

Business rates

The government has faced a massive backlash over changes to business rates set to come in to force in April, but Hammond today announced three measures to help those affected.

  • No businesses losing small business rate relief will see their bill increase by more than £50 a month next year.
  • Pubs with a rateable value of less than £100,000 will get a £1,000 discount on their business rates bill.
  • Other pubs and restaurants will be able to apply for a share of £300m funding allocated to local authorities to help hard-hit businesses.

Though the Association of Licensed Multiple Retailers (ALMR) said the reforms would save the sector over £24m, the British Hospitality Association (BHA) warned that the help did not go far enough.

“We remain extremely worried that some small hospitality businesses, facing an average 23% rates increase, will be forced out of business,” said BHA chief executive Ufi Ibhraim.

Alcohol tax

Beer and cider tax is no longer frozen, and will rise 3.9% in line with inflation alongside wine and spirits from 12 March.

This means the price of a pint will go up by two pence, the first increase in five years since the abolition of the controversial Beer Duty Escalator, which saw beer tax rise 50% from 2008-12.

“The rise in beer duty will ultimately hit consumers in their pockets and lead to pub closures across the country,” said CAMRA national chairman Colin Valentine.

“Further beer duty increases will lead to unsustainable price increases in pubs. The decision completely ignores the pressures that are being faced by the beer and pub sectors.”

The Wine and Spirit Trade Association (WSTA) added that the ‘disappointing’ rise in wine tax would hit the industry hard at a time when it was facing a ‘tough trading landscape’.

Sugar levy

The headline-grabbing policy from last year’s spring Budget is still going ahead, but will raise £130m less than initially forecast as Hammond said producers were already taking steps to reduce sugar in their drinks.

From 2018 drinks with at least five grams of sugar per 100ml will be taxed at 18p a litre, rising to 24p for those with eight grams per 100ml.

Rising wages

The National Living Wage (NLW) will increase by 30p to £7.50 per hour in April this year, ahead of the Government’s plan for it to reach £9 an hour by 2020.  If the NLW continues to rise as planned it is expected to have cost the sector an extra £13.3m in wage bills by 2020.

What was missing?

Once again there was no mention of a cut to Tourism VAT, a move supported by a cross-party group of MPs. According to Oxford Economics research commissioned by the Cut Tourism VAT campaign, reducing the tax from 20 to 5% could boost consumer spending across the hospitality and tourism industry by 35%.

Related News

National Insurance U-turn Spring Budget 2017 welcomed by hospitality

Hospitality expert cautiously welcomes National Insurance U-turn

Restaurants urged to apply for business rates relief

Restaurants urged to apply for business rates relief

Business rates help for hospitality businesses

Government promises industry help over business rates

Red tape: the current business rates system is considered 'unwieldy and opaque'

Make business rates fairer, Government urged

100 MPs back freeze on beer tax

100 MPs back freeze on beer tax

Beer tax hikes have reached 42 per cent since the controversial escalator was introduced in 2008

Chancellor ‘totally wrong to raise beer tax’, says BBPA