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Rachel Reeves has dealt a significant setback to struggling hotel and restaurant businesses by indicating that financial support will be limited to pubs to manage the hike in business rate bills.
Hospitality entities and small retailers are voicing their concerns about survival after changes in the Budget left them confronting significant increases in rates, which are taxes paid by businesses to local councils.
The government has shown readiness to support pubs, following a campaign that involved barring Labour MPs from numerous venues.
Nonetheless, the Treasury seems reluctant to extend assistance to the broader hospitality industry, much to the dismay of hotel and restaurant operators who argue they have suffered equally due to the recent policy changes.
Meanwhile, pubs are still awaiting details on the promised support, which the government hinted was forthcoming two weeks ago.
Attending the World Economic Forum in Davos, Ms. Reeves hinted that other sectors within hospitality might not receive the same aid.
Asked about the policy by reporters, she said: ‘The situation that the pubs face is different from other parts of the hospitality sector.’
Rachel Reeves is attending the World Economic Forum in Davos, Switzerland
It will come as a bitter blow to firms outside the pub trade who have warned of closures and job losses if the Chancellor does not act.
Tory business spokesman Andrew Griffith said: ‘A U-turn which excludes the wider sector would be criminal.
‘Many hotels and restaurants face even higher rate rises and their viability is equally at risk.
‘Labour just doesn’t get business.’
Allen Simpson, chief executive of UK Hospitality, said: ‘The entire hospitality sector faces the same cost challenges – from eye-watering business rates hikes to the soaring cost of employment.
‘These are not challenges unique to pubs. Our hotels, restaurants and cafes, to name a few, all face their business rates bills increasing by thousands, driven by the same large increases to rateable values affecting pubs. These businesses employ six in seven people in hospitality.
‘While it’s positive there will be an announcement soon, this is a hospitality-wide problem that requires a hospitality-wide solution.
‘The Government has one chance to get this right. Without a package of support for the entire sector, I fear it will be too little, too late.’
Ms Reeves said the Budget had offered £4.3billion of support to ease the burden on firms who are losing Covid-era discounts and have also seen their properties revalued – which also affects how the rates they pay are calculated.
She said: ‘I do recognise the particular challenge pubs face at the moment and so I’ve been working with the sector over the last few weeks to make sure that the right support is in place.
‘We’ll be announcing something in the next few days – we’ve just been using this time to get the package right.’
The comments as pub bosses said they were still in the dark over what the Treasury is planning.
Chris Jowsey, chief executive of Admiral Taverns, which owns more than 1500 pubs, said his business rates bills will go up by an average of 25 per cent in April and 173 per cent over the next three years.
‘Unfortunately we haven’t heard anything of any detail yet. It’s now two months since the Budget and unfortunately we are still to hear what the actual resolution is going to be,’ he told the BBC.
He said the people running his pubs ‘are really quite concerned and anxious now because they don’t know what the future holds’.
Mr Jowsey added: ‘Unless they get some clarity and some certainty soon, it makes it very difficult for them to make decisions.’
It comes a day after leading hotel groups including Holiday Inn, Hilton and Butlins urged the Chancellor to expand the tax relief planned for pubs to the wider hospitality industry.
In a letter to Ms Reeves, more than 130 hotel bosses said soaring business rate bills are ‘the most significant challenge’ faced by the industry and that plans to offer rate relief to pubs must to extended to other firms.
They warned of closures and job losses if Labour does not act.
The average business rates bill for hotels will increase by 115 per cent over the next three years, according to analysis by UK Hospitality.
That will add £205,200 to the typical bill – and makes the sector one of the hardest hit by changes. In the letter, bosses said it was ‘critical’ the Government provides ‘a whole-sector solution’.
Reacting to the Chancellor’s snub, Sir Rocco Forte, chairman of Rocco Forte Hotels, described the increase in rates bills facing the industry as ‘a completely ridiculous proposition’.
He said: ‘It is deeply disappointing that the Government is not listening to the hospitality sector. Many establishments will simply go out of business. And what about retailers, who are also facing extortionate increases in bills in many cases?
‘The truth is, the time for temporary sticking plasters aimed at individual sectors has long passed. What we need is fundamental reform of the broken business rates system.’
Girish Sanger, director of Mastcraft Hotels, which operates luxury outlets such as the Courthouse Hotel in Soho and the Washington Hotel in Mayfair, said: ‘We are deeply concerned about the impact of higher business rates and the indication that hotels will not be included in the forthcoming Government U-turn.
‘Hospitality and tourism are vital parts of the British economy, but since Covid the industry has faced relentless increases in costs, whether that’s higher National Insurance bills, utilities or wage bills.
‘Instead of being supported, it feels like we are being penalised and ignored. The entire system of business rates is deeply unfair, since online businesses pay little or nothing while those operating from premises bear the brunt. This Government promised proper reform of the system to address this unfairness, and we’d like to see that delivered.’
Hotel operator and drinks entrepreneur Steve Perez said: ‘Hospitality is on its knees and a U-turn targeted only at pubs won’t be sufficient.
‘It is particularly frustrating as Rachel Reeves promised a golden era for hospitality in the Budget.
‘For many hospitality businesses, this is the straw that will break the camel’s back. I would like to see real rates reform which is what Labour promised. We need to level the playing field between online companies which get away with paying nothing and bricks and mortar businesses like ours which foot the bill.’
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