Energy contracts and business rates left out of Spring Budget

The extension of the government's Draught Relief initiative was the key outcome for hospitality businesses in this afternoon's spring budget announcement, with many other hospitality concerns – including energy contracts and business rates – left unmentioned.

Chancellor Jeremy Hunt extended the Draught Relief from 5% to 9.2%, meaning the duty on an average draught pint of beer poured in on-trade venues does not increase from August and will be up to 11p lower than the supermarket duty. The disparity between the two sectors in VAT paid on food was not addressed.

The commitment to duty on a pint served on-premise being lower than the supermarket was called the "Brexit Pubs Guarantee" by the chancellor, who highlighted how this change will also apply to every pub in Northern Ireland following the Windsor Framework agreement.

Elsewhere, a new voluntary employment scheme for disabled people and those with health conditions called Universal Support will be funded in England and Wales. The government says it will spend up to £4,000 per person to find them a suitable role and cater to their needs, supporting 50,000 places per year once fully rolled out.

Taxation

A ‘full expensing’ policy will be introduced from 1 April 2023 until 31 March 2026 alongside an extension to the 50% first-year allowance in the same period. Full expensing will allow businesses to deduct 100% of the cost of certain plant and machinery from their profits before tax. If eligible, for pubs and bars this could include computers, office equipment and kitchen fit-outs. 

The 50% first-year allowance allows businesses to deduct 50% of the cost of other plant and machinery, known as 'special rate assets', from their profits during the year of purchase. This includes long life assets such as solar panels and thermal insulation on buildings. This was previously due to end at the end of March 2023, but has been extended by three years. 

Industry reacts

Charlie Phillips, founder of Morty & Bob's

Charlie Phillips, founder of London-based restaurant group Morty & Bob's, comments: "The energy bill support is still much needed. Is another three months enough though!? That is the question small businesses such as mine will be asking. The super deduction and the rise in corporation tax coinciding is a big blow for low profit making companies like small businesses, who are potentially relying on more funding and yet are being penalised for the profit they make."

UKHospitality chief executive Kate Nicholls comments: "With hospitality businesses continuing to struggle with vacancies running at 56% higher than pre-pandemic levels, the measures announced today are significant in incentivising people back into work and hopefully alleviating crippling labour shortages. 

"The significant reforms to childcare and the measures to help the over 50s re-enter the workforce are both areas on which UKHospitality has been calling for action and we’re pleased the chancellor has recognised the help it can offer tackling the enormous vacancies in hospitality.

"Maintaining current levels of energy support to consumers, freezing fuel duty and inflation reducing will help hard-pressed households and increase disposable income, which will be a huge boost for venues in desperate need of trade.

"This will be particularly needed as the sector is still set to see huge energy price increases when current support ends in April, which unfortunately was not addressed. It remains the case that we need to see urgent action on the market failures identified by Ofgem in its non-domestic review update yesterday. The current timeline of further action by the summer is not good enough.

"The reduction in draught duty is positive and we hope this will incentivise more visits to our pubs, restaurants and hotel bars. Addressing draught duty is a good start and I would urge the Government to consider rolling out this type of tax cut across the wider drinks market.

"With duty primarily paid by suppliers, such as breweries, it’s essential that any benefit is passed through to venues to help deliver the government’s objective of reducing inflation and growing the economy."

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