Headlines and Details

July brought interesting headlines for the hospitality sector, but the devil lies in the detail. A new Prime Minister brings welcome relief to the pub and events sector. One of Andy Burnham’s first actions was the announcement of an additional business rates cut. This makes a great headline.

Previous Tax Headlines

That proposed business rates cut comes on top of the previous 15% reduction in April 2026 as part of a three-year package, announced by Keir Starmer’s government.

In addition, from June 25th, VAT was cut to 5% on entry to attractions, where VAT was charged at the full rate and on children’s meals selected from the children’s menu eaten in venue. This potentially had wider impact on the hospitality sector enabling more to benefit.

It was also something that could be acted upon now. Especially so as it comes to an end on 1st September and the return to school. Given that few businesses have a quarterly VAT return to the end of August, hopefully MTD will be able to seamlessly cope with the details of timing and eligibility!

A Couple of Thoughts on Detail

The additional detail of who will actually benefit from the 20% business rates cut from April 2027 has to wait until the Autumn Budget. It is unlikely to be the whole of the hospitality sector unless the Chancellor is able to find more money for this.

The government calculates that this cut will save pubs on average £1,100 each year. While this is an average and some will see greater reductions, this is not a substantial sum. Or is it?

In the South West, the average cost of a pub pint is £4.90-4.95. For simplicity call it a fiver and the business rates saving £100 per month. For those with a glass half empty viewpoint, this is the equivalent of 20 pints per month, if this was pure profit. If a standard barrel holds 288 pints, this might lead some to say the help is barely scraping that barrel for a longer-term turnaround!

For those with a glass half full viewpoint, given the average net profit on a pint is 10p, this is the equivalent sales of 1,000 pints per month to the bottom line of the business. It also underlines why food is more important than drink to overall profitability of hospitality.

Both headlines are a start to buy a little time for meaningful change for the sector. But only if acted upon now to take advantage and face that longer term detailed change.

Comments are closed.