Chancellor grants unprecedented support for cafés and restaurants

In an announcement to the Commons earlier today, the Chancellor pledged to cut VAT on food, accommodation and attractions from 20% to 5%, starting from next Wednesday. The Treasury also pledges to pay firms a £1,000 bonus for every staff member kept on for three months when the furlough scheme ends in October. “If you’re an employer and you bring back someone who was furloughed - and continuously employ them through to January - we’ll pay you a £1,000 bonus per employee,” he said during his speech to MPs. However, he rejected calls to extend the furlough scheme beyond October, saying it would give people “false hope” that they would have a job to return to.

This VAT cut will apply to eat-in or hot takeaway food from restaurants, cafés and pubs, accommodation in hotels, B&Bs, campsites and caravan sites and visitor attractions.

In a further popular move to boost trade, Mr Sunak also announced an “Eat Out to Help Out” discount, which he said would help protect 1.8 million jobs. Meals eaten at any participating business, Monday to Wednesday, will be 50% off in August, up to a maximum discount of £10 per head for everyone, including children. Businesses will need to register, and can do so through a website, open next Monday and apply in the month of August, the chancellor said in his statement.

These schemes constitute an unprecedented support package for the hospitality sector, over 80% of which was forced to cease trading in March as a result of Covid-19, resulting in the closure of several businesses and over 2 million workers in the sector being put on furlough.

Commenting on today’s update, the Food and Drink Federation’s (FDF) Chief Executive, Ian Wright CBE, said: “The FDF is extremely appreciative of the unprecedented support the UK Government and the devolved administrations have provided throughout this crisis. Up and down the country, the ‘Hidden Heroes’ of the UK’s food and drink industry have kept the nation fed through the last few difficult months.

“The UK’s food and drink manufacturers who supply into the hospitality and catering trade have been hard hit by the crisis, as their customers disappeared overnight. These ‘squeezed middle’ firms will enthusiastically welcome the Chancellor’s announcement today to cut VAT on food and hospitality and slash the cost of eating out. We hope these measures will lead to a significant boost in demand for the hundreds of manufacturers who supply into hospitality and the out of home sectors and help them to manage increased supply costs.

“However, if demand does not return quickly, these firms will continue to struggle unless they - and the sector they supply - receive additional employment support. The Chancellor must therefore keep the option of extending full furlough support to hospitality and their food and drink suppliers in his back pocket so we do not lose vital jobs and businesses.

“The closure of hospitality has disproportionately affected young people’s employment prospects. We applaud today’s interventions to increase employment opportunities for young people who would otherwise be hit hardest by unemployment. The FDF is pleased that government heeded our call to introduce cash incentives for employers taking on new apprentices. We would now welcome the opportunity to work with government to ensure food and drink manufacturers can make the most of the schemes announced, as our industry offers great careers, in every constituency.”

Mr Sunak warned “hardship lies ahead,” but vowed no-one would be left “without hope,” in his statement to MPs in the Commons.

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