Rishi Sunak delivered his Government’s Spring Statement on the UK economy today, the 23rd of March 2022, as inflation hit a 30-year high of 6.2%. He did so against a backdrop of uncertainty, brought about by the cost-of-living crisis and exacerbated by war in Ukraine.
He announced three immediate measures as part of the Government’s plan to tackle the increasing cost of living. They include:
Motorists – fuel duty will be cut by 5p per litre as part of the biggest cut ever to take place. This will take effect from 6pm tonight and will be in place until March 2023.
Energy efficiency – for the next 5 years, homeowners having solar panels etc., installed will pay 0% VAT. All the red tape surrounding energy saving solutions will be abolished, although these rules won’t be introduced in Northern Ireland immediately.
Rising costs for vulnerable households –Sunak announced he would double the household support fund to £5bn. Local authorities will receive this funding from April 2022.
Publishing a tax plan – The Spring Statement Tax Plan will reduce and reform taxes in three ways; it will help families; create the conditions for higher growth; and share the proceeds of growth fairly.National Insurance – the threshold was due to be increased by £300, but it will now be increased to £3000 meaning that from July 2022, you will need to earn £12,570 before you pay national insurance.
Business rates discount – retail, leisure & hospitality businesses will get a 50% discount. Sunak said that a typical pub will save £5,000.
Employment allowance – set to increase to £5,000 starting in 2 weeks’ time.
Basic rate of income tax – to be cut by 1p in the pound in 2024.
- A new Efficiency and Value for Money Committee will be set up to cut £5.5 billion worth of cross-Whitehall waste – with savings to be used to fund public services.
- £50 million in new funding will be provided to create a Public Sector Fraud Authority to hold departments account for their counter-fraud performance and to help them identify, seize and recover fraudsters money.
- Residents across the UK will benefit from a fresh set of infrastructure projects as we open the second round of the £4.8 billion Levelling Up Fund. It will continue to focus on regeneration, transport, and cultural investments.
What’s the issue?
The global economy is still very much powered by fossil fuels. The wholesale energy prices (gas, electric, oil) have been going up for some time, which has impacted on the cost of producing food, packaging and transport.
The government predicted inflation of around 5-6% and provided special measures to support households financially with rising energy costs. This, coupled with the crisis in Ukraine, means that the price of energy and certain foodstuffs will either rise or remain high for some time.
As we were supposed to be finally emerging from Covid at this point, the Chancellor had announced or confirmed tax rises, or the end to covid measures in the next few weeks.
We will have to wait and see what impact industry lobbying has had on issues such as VAT rates or other potential government measures. However, disappointingly for us – at present, the key ask for the hospitality sector; an extension of the 12.5% VAT rate, was not included in the Spring Statement.
Here is a summary of how we have been working on your behalf and some suggestions that may suit your business moving forwards. As ever, we are here to support you, our members, please do get in touch if you are concerned or would like further support.
What’s been happening in the background?
- We have been vocal supporters of the hospitality industry wide ‘VAT’s Enough’ campaign. Feeding in the interview research we carried out with members in our ask for a retention of the current VAT rate for another 18 months.
- Worked within the Hospitality Council and the Hospitality Task force to explain the specific needs and concerns of NCASS members and how best they can be supported as well as the potential impact of additional costs.
- Provided case studies, data and member feedback.
- In daily contact / conversation with Government departments.
- Developing a broad offering of discounts and cash back for members from key industry suppliers and partners.
- Worked with partner organisations across the hospitality and events sector to ensure consistent and co-ordinated responses to government
Mitigating the Risk
- Increase your prices. Don’t be a hero and don’t be afraid to make a fair margin on your offering. A race to the bottom on prices won’t solve the problem.
- Manage your costs. Delta airlines famously saved $40,000 a year by removing one olive from each of their first-class salads. Are there costs that can be stripped back without impacting on the quality of the product. Remove low selling items, or products that increase the workload or need for more staff or equipment.
- Sign up to cash back and discount deals through NCASS. Saving a couple of percentage points on your key products might prove a great addition to the bottom line. Whether cashback and vouchers through wholesalers Booker Makro, compostable packaging through BioPak, fuel discounts via Wex, insurance from Giles, or LPG from Calor, these are just some of the deals we have negotiated for NCASS members. Log into your control panel or call the office to find out more.
- Shorten supply lines can you buy some products direct from producers, small farms, smallholders and allotments? Many of these businesses and hobbyists struggle to access traditional markets for their products and may be cheaper than buying through wholesalers – but remember, if you cut or manage portion size more effectively, if the price seems too good to be true – it most likely is.
- Manage waste & portions If some of your food is coming back on plates or going in bins, there’s a good chance your portions are too big. Can you reduce the portion of high-cost products on the plate? When the confectionary companies had to reduce the sugar in their products – they made chocolate bars smaller. People still buy chocolate and sometimes they buy two.
- Change Up. You hustled through a two-year pandemic: you can handle this. Are there opportunities in takeaway, street trading, cook at home boxes? Can you work with wet led pubs or any of the other amazing, innovative pivots you have employed in the last two years.
- Finance & funding
- Can you access government loans, grants or other finance that may help you? Your LEP or Chamber of Commerce have useful information on how to access funding.
- Get on to the pavement. For £100 and a two week wait you can get a pavement licence offering you al fresco options and space for more covers.
The independent hospitality industry blossomed in the wake of the last recession. Street food literally emerged from it. Festival catering, boutique hotels and artisanal café’s, cocktail bars and restaurants flourished during difficult times.
We do not know how customers will react or how much disposable cash they will have, people will cut their cloth accordingly but will still allow themselves little luxuries, from takeaways to music festivals, an evening of street food or some crafty cocktails. Rolled over festival tickets might mean customers will have more spending money this year. The industry has already begun to recover and while there still seems to be reluctance amongst older demographics (over 55’s) to eat and drink out, people across the UK have a collective need to be social and have experiences so will continue to find moments to enjoy great hospitality, whether in a field a car park or restaurant.
For the Government fact sheet for businesses, click here
For the complete Spring Statement, click here.
For the Spring Statement Tax Plan, click here.