July 8, 2020

Hospitality industry boost or bust… but who will benefit?

Richard Lake, an Associate in the Leisure & Hospitality team at RWK Goodman comments.

“Headlining today’s Summer Statement is an invitation to take lunch or supper on the government. Eat Out To help Out will offer a discount of up to £10 per customer in participating restaurants every Monday, Tuesday and Wednesday in August.

“Whilst the larger chains will be well placed to prepare and market themselves over the next three weeks, independent restaurants may not - and it is those independents that play a pivotal role in our local communities. Independents may be able to pivot more quickly in terms of their offering, but the three-week lead time for this scheme will play into the hands of better resourced chains. The question is how many will survive the next three weeks to take advantage of diners’ and government’s hospitality.

“The Eat Out To help Out campaign is supported by a cut in the rate of VAT to 5% on dining and accommodation, but will only be successful if the public can be persuaded that they are safe and they are getting value for money – and there is no guarantee that the reduction in VAT will be passed on to customers.

“The potential for reputational damage will probably deter most business owners from taking advantage of the tax break, however these are challenging times and business owners might be tempted to keep as much of the benefit themselves to cover increased costs without passing it onto their customers.

“There is also a question as to how taxes are added to individual items. Customers may expect to see their whole bill lower following the cut in VAT and Eat Out To help Out, but that is not necessarily the case – alcoholic drinks are, for example, excluded. We may see more squabbles over the bill at the end of the evening.”

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