That’s before any increases to National Minimum Wage or employer National Insurance contributions.
“We voted for change. Now we desperately need it in hospitality,” says Paul Askew: Chef Patron and owner of The Art School in Liverpool.
“There’s an ongoing climate of uncertainty with closures of all kinds of hospitality businesses each week – shutting down for good because they can’t make their businesses add up any more. Turnover remains relatively the same broadly speaking for many operators I know both here in Liverpool and around the UK, but the reality is that making this turnover profitable is getting harder each day.”
He’s calling for an urgent recalibration in tax for hospitality, which generated £54bn in tax receipts in 2022. It’s been an ongoing issue, which saw calls for a reduction in VAT ahead of the Spring Budget in March this year, but these did not materialise.
“Unless swift action is taken, the sector is gearing to fail with post-Covid support long gone but the debts very much remaining, along with the ongoing lack of consumer confidence,” he says. “And it’s not just restaurants – pubs, cafes, bars and more all face the most difficult trading landscape imaginable, with the perfect set of circumstances for failure.
“The single most important point is to recalibrate the VAT charge on fresh prepared food to be in line with Europe for fresh led businesses so we can grow, invest and thrive using artisan skills and develop our people and business normally, not just scraping through week by week.
“There’s a chorus of businesses across the UK asking for this.”
It’s not just an issue for restaurants. The Campaign for Real Ale (CAMRA) data shows that over 1,200 pubs will likely close for good this year, compared with around 1000 in 2023, and just over 800 in 2022.
Wine bars, coffee shops and cafes are also fearing the worst from the upcoming budget.
Chris and Bianca Nix set up Ovation Wine, a wine and spirts bar based in Oakham, Rutland in October 2021 using a Start Up Loan from Virgin StartUp.
Now, they are worried about the impact National Insurance Contributions, an increase in minimum wage rates and other tax changes will have on their team of ten staff.
“As a small business, we are horribly impacted by any sort of rises, as there is no relief in any other way,” says Bianca.
Similarly, Reshmi Bennett, who owns angesdesucre.com, a bakery in London and Surrey had planned to hire staff before Christmas, but has now decided against taking a risk.
“Our business had started seeing some growth after a long time of struggles with lower demand (cost of living crisis) and higher operating and ingredients costs,” she says.
“As a craft bakery we are limited by capacity and have been turning down orders due to lack of staff. However with the increased National Insurance rumours and uncertainty plus costs still going up, we are freezing employment plans and not going ahead for now. Margins are too small to allow for further increases and I’d rather turn away orders than increase capacity.”
MasterChef winner Simon Wood chef recently closed the doors on his much-loved Manchester WOOD, after seven years, after trying to ride the storm of covid rent arrears, energy increases, ingredients cost and business rates.
He made a plea on X this morning: “Significant challenges have beset the hospitality sector in the UK in recent years. The situation surrounding energy prices alone is nothing short of a scandal, and our so-called regulatory bodies stood idly by while businesses collapsed. And don’t even get me started on VAT; it seems as if there is an aim to stifle entrepreneurial spirit in this country.’
Whatever the budget brings, there seems to be a huge amount of camaraderie among the small businesses working across the industry.
Gary Usher, owner of Elite Bistros, which owns restaurants across the north west, posted on X this morning:
“Good luck to all the operators in hospitality today who will be wondering how to get through the next 12 months with increased costs in today’s budget. Speaking from my own experience this has a massive impact on the mental health of all the people trying to run small businesses.”
He added: “Operators up and down the country will be discussing the few options they have left such as changing to cheaper suppliers, cutting hours and putting menu prices up… If they haven’t done all this already. Without sounding overly dramatic the next option is to close.”
