By Steve Reynolds, chef and owner of The Stagg Inn in Titley, Herefordshire
Covid-19 has been a nightmare for the proprietors of the pubs millions of homeworkers once frequented. For many of us, the last 15 months has been the worst in memory. Some have innovated by offering cook-at-home boxes and exuberant takeaways – but this was simply not an option for all publicans and so government rules banning the sale of alcohol to takeaway deprived thousands of their only potential revenue stream. Similarly, only 40 per cent were able to open outdoors in April and May.
Our sector’s revenue tumbled by £80.8 billion between April 2020 and this March, causing almost 10 thousand licensed premises to permanently close their doors. The impact was particularly acute for those who rent their pubs. Starved of income, thousands couldn’t afford their rent and have lost business they’ve devoted years of their lives to – this is nothing short of heart-breaking.
This is only part of a huge human cost. Around 355,000 jobs in hospitality were lost last year despite government support. This is a whopping 44 per cent of all jobs lost due to this awful virus, and a testament to the fact our industry has been disproportionately impacted. Worst of all, it is sadly inevitable that further redundancies will follow when the furlough scheme is eventually wound down in September.
Although pubs across the country are back open, reductions in capacity and time consuming and costly social distancing measures mean many will struggle to turn a profit. With a June relaxing of social distancing now being questioned, pubs need support to prevent further closures and job losses.
There are ways to support us through the hard times that are still to come, but this should come in the form of tax reductions, not further handouts. Although grants have provided some stability during sustained periods of closure, we are an enterprising bunch and sustained tax cuts will provide an incentive to increase opening hours and could temp new entrants to enter the trade.
The industry has appreciated the chancellor’s July decision to cut VAT on food to 5 per cent, but a planned rise to 12.5 per cent in September would come at exactly the wrong time. A summer spending boom is possible, but social distancing will prevent us from fully capitalising, and as always, business will decline in the months preceding Christmas. ONS figures show that tourism spending fell by 13.2 per cent in the fourth quarter of 2019 compared to the preceding three months.
Many pubs will use any profit generated over summer to cover debts and catch up on missed rent payments, meaning that heading in September many will still be struggling for cash flow. Any footfall coming through the door at that time is worth its weight in gold. Almost trebling VAT at this time will drive punters away, not lure them through the doors.
With the threat of new variants and future lockdowns looming indefinitely, the government should commit to maintaining the 5 per cent VAT rate until we can be 100 per cent certain that lockdowns - and the loss of our livelihoods - will not be imposed. Realistically, and to give pub owners the stability they need, that means guaranteeing to keep it over the next few years.
Alcohol must also be included in this VAT cut. At present, we publicans are having to laboriously record our alcohol takings to comply with this higher rate of VAT. If it is brought into line with food and soft drinks, this would hugely reduce our administrative and accounting burden.
This discrepancy is discriminatory against wet-led pubs, who have not been permitted to trade for large parts of the last year. A re-alignment would give them the opportunity to pass some savings on to consumers and compete more effectively on price with the supermarkets that cleaned up during the pandemic.
Keeping the 5 per cent rate for another year would save £13.5 billion and potentially hundreds of pubs. The government should view this as an investment: pubs are community assets and minimising closures will ensure pubs continue to provide the exchequer with a source of revenue going forward – with no need for further handouts. Empty pubs benefit no one, but extending VAT relief benefits both publicans and our customers.