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8th July 2020The Chancellor’s Summer Statement – initial reaction from HW Fisher

VAT should be reduced for the hospitality sector for a minimum of two years – January isn’t enough time to create long term certainty

Our restaurants, pubs, shops and hotels are struggling. This is a timely announcement from Government as businesses are in desperate need of a clear action plan. It is vital we see the hospitality industry back up and running, and these measures announced today will provide an essential lifeline for many UK businesses.

A temporary reduction in the VAT rate and income tax for lower earners will boost consumer demand and raise consumption, but many businesses will fear the measures announced today aren’t enough. To have a lasting impact and bring back confidence, VAT should be reduced for the hospitality sector for a minimum of two years – January isn’t enough time to create long term certainty.

This is a step in the right direction, but there is more that Government could do. At HW Fisher we’ve outlined two additional measures we would like to see from Government that will improve the confidence of the UK hospitality industry:

  1. We would urge the Chancellor to consider introducing a grant covering six months’ rent for struggling businesses. Landlords should also be encouraged to defer rent from March to June and look to accept repayment as a percentage of turnover going forwards.
  2. Businesses must be encouraged to diversify. It is vital that the Government take steps to agree to pass The Business and Planning Bill – restaurants and pubs need the flexibility to expand their offering as much as possible to help them capitalise on the summer months.

The Success of Stamp Duty changes will depend on the target and timing

The success of the SDLT cut will be determined by whether the Chancellor has got two things right- the target and the timing. The economy is uncertain and this reduction won’t necessarily be enough to spark the confidence needed to take on long term liability of a house purchase. There is more to consider – mortgage availability, rising house prices, economic growth and overall market confidence are critical factors and the Chancellor should not forget that.

A green investment package

The announcement of a green investment package today is a small but positive step towards achieving a carbon net zero economy. This is a step in the right direction and we hope that investments in greener energy and decarbonising public buildings will not only create jobs and kick-start a more environmentally friendly economy, it will also encourage businesses to see the benefits of working towards a more sustainable way of doing things. Covid has created an opportunity for all of us to reset. It won’t always be easy for businesses to balance the dichotomy of profit and purpose, but it is important, and businesses should put sustainability at the heart of their recovery plans.

Keeping “surplus staff” for a retention bonus will cost businesses more longer term

The economic pain by businesses across the UK is being felt now and it is questionable whether bonus is strong enough to act as a corporate motivator to keep staff.

The contributions to be made by employers to furloughed staff will continue to increase over the coming months and therefore, cost conscious owner/managers are unlikely to be driven by a incentive which is a lifetime away in this current economic climate. Even with this bonus, business owners will need to ensure their costs are controlled in the short-term and retaining ‘surplus’ staff for a retention bonus down the road will still be more costly.

Key contacts

Russell Nathan HW Fisher

Russell Nathan
Senior Partner

020 7380 4971
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Helen James HW Fisher

Helen James
Partner - Corporate Finance

020 7874 1163
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Simon Michaels HW Fisher

Simon Michaels
CEO of HW Fisher business solutions

01923 698391
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