Why Government Support for Restaurants and Pubs Isn’t Working

From 'Eat Out to Help Out to the VAT reduction, Britain’s hospitality industry isn’t getting the support it needs.
October 9, 2020, 3:01pm
Bartender pours drink while wearing mask.
Photo: Getty Images

Britain's hospitality industry has suffered more than most during the pandemic. According to UK Hospitality’s Quarterly Tracker, restaurants, bars and pubs saw a 21 percent decline in trade in the first quarter of this year. Industry bodies predict a further 300,000 job losses and countless closures without dedicated government support. 

While the Eat Out to Help Out scheme and the recently announced VAT cut were intended to help the ailing sector, many in hospitality say that the measures don’t go far enough. A group of high-profile chefs and campaigners is now calling for a Minister for Hospitality to be installed, giving the sector a representative voice in Parliament. 

So, have any of the government’s many coronavirus measures had a positive impact on the hospitality industry? Here’s a look back at the past few months. 

NHS TEST AND TRACE 

What is it? From the 14th of September, it became mandatory for hospitality businesses to register their customers’ information with NHS Test and Trace. Staff must ask at least one member of every party to provide their name and contact details, which are kept for 21 days and handed over to the contact tracing service if requested. 

What is it supposed to do? NHS Test and Trace can track who has been in which venue, and alert anyone who may have contracted COVID-19 there. 

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What will it actually do? Other than being a data privacy nightmare, guidance for hospitality venues on NHS Test and Trace was limited and poorly thought out

Restaurants and bars reported using pen and paper to collect customers’ details, risking the spread of infection, while others had no clue how to store data digitally without breaching GDPR guidelines. Last month, reporting from The Telegraph showed that as many as a third of restaurants and cafes are failing to collect customer details – in part due to these logistical issues. 

VAT REDUCTIONS

What is it? Chancellor Rishi Sunak first announced the 15-percent VAT cut for the tourism and hospitality industries back in July, then extended the reduction in a speech last month. The temporary cut will now remain in place until the 31st of March. 

What is it supposed to do? Businesses who deferred VAT bills will be able to pay back their taxes in smaller, interest-free instalments.

What will it actually do? Data from the Office for National Statistics shows that the VAT cut helped drive UK inflation to a five-year low in August. Martin Beck, lead UK economist at Oxford Economics, tells VICE News that this was one of the aims of the measure. 

“The government is trying to get prices down so people would go and buy more stuff that was one objective of [the VAT cut],” he says. “Some have pocketed the savings to stay afloat, while others have passed the tax cut onto consumers in the form of lower prices to attract people back over the summer. Either way, it’s good for the economy and businesses in terms of boosting their cash flow, revenues and profits given how hard they’ve been hit in the last six months.”

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However Beck notes that because interest rates were already so low, there is only so much that a reduction in VAT can achieve. “It’s supposed to drive down long-term interest rates, they're so close to zero already there's hardly any room to push them lower,” he says. “The government needs to do more in terms of spending and tax cuts would be more effective.”

EAT OUT TO HELP OUT

What is it? Chancellor Rishi Sunak’s £500 million subsidy for restaurant and pub meals, which gave diners up to £10 off their meal every Monday to Wednesday in August. 

What is it supposed to do? Encourage people to return to restaurants, pubs and cafes and spend money. 

What will it actually do? In total, more than 100 million meals were bought as part of Eat Out to Help Out and restaurant bookings surged, especially on the final day of August. According to official government figures, restaurants who took part in the scheme have so far claimed reimbursements of £522 million. 

However, there has been backlash to the scheme. Some criticised the deal for causing long wait times at restaurants and resulting in hostility towards staff, while others said that the Monday-to-Wednesday rule simply shifted weekend trade to earlier in the week. A survey from the British Chambers of Commerce also found that 66 percent of respondents in hospitality and catering reported a fall in sales between June and the end of September. 

In the weeks since Eat Out to Help Out ended, there has even been debate about whether the scheme actually contributed to a rise in coronavirus cases. Last month, data released by restaurant bookings system OpenTable and analysed by The Conversation showed that August’s crowded restaurants may have accelerated transmission rates.

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Sunak has brushed off such criticisms of Eat Out to Help Out, cautioning against “jumping to simplistic conclusions” about the link between COVID-19 and busy dining rooms. So, who to believe?

Professor Julian Peto from the London School of Hygiene and Tropical Medicine tells VICE News: “It’s impossible to actually know whether the scheme resulted in more cases because nobody has had good enough data to accurately measure. If there was mass testing with an efficient link of contact tracing, then we’d have more of an accurate idea of how people were being affected, which would ultimately get a better control of the epidemic. Right now, it’s in shambles. The economy's a disaster, people's social lives are a disaster and the government is a disaster. Everything is going to be switched on or switched off, until there's a universal vaccine.”

THE RULE OF SIX

What is it? New laws came into force last month, banning people in England from gathering in groups of more than six. Businesses not enforcing the rule could be hit with a £10,000 fine or even shut down.

What is it supposed to do? Limit social gatherings to combat the sharp rise in coronavirus infection rates.

What will it actually do? Speaking at a news conference last month, Boris Johnson said that he was “hopeful” that the new measures would lower infection rates. But many in the hospitality industry are worried that the rule of six will have a major impact on trade.

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Chris Leach is chef and owner of Manteca, an Italian restaurant in London’s Soho. 

“We used to get a number of large parties and groups, especially on the weekend, and our style of food has always lent itself to being shared,” he says. “We had a menu for six-plus, which included whole lamb shoulders, which we obviously can’t do anymore and have to be really careful with wastage. We’ve had to adapt the menu format somewhat in response to that.”

He adds: “Not being able to do big Christmas parties this year is particularly devastating, as with any restaurant, it’s usually our busiest time of the year.” 

THE 10PM CURFEW

What is it? Restaurants, bars and pubs can no longer serve customers after 10PM. Rules vary across the country, and local lockdown areas in the north of England as well as Scotland and Wales have seen hospitality venues close altogether. 

What is it supposed to do? The rule is an attempt to prevent alcohol-related breaches of social distancing, as well as limit the number of people in hospitality venues. 

What will it actually do? Perhaps more than any other measure, the 10PM curfew has hit Britain’s restaurants and pubs hard. 

Hospitality sales plunged by a third after the curfew, while takeaway alcohol sales are up by 36 percent. Industry publication The Caterer has launched a “Can the Curfew” campaign, which calls for a reassessment of the 10PM rule. It argues that asking guests to “all book at earlier times and leave the premises en masse at 10PM runs counter to the aim of social distancing and only serves to increase the risk of coronavirus transmission.”

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Adam Hyman, founder of Code Hospitality, is also against the curfew. 

“Without having a self-pity party – it's very demoralising,” he says. “This curfew has been a wrecking ball and destroyed all the hard work to those who’ve busted a gut for the past two and a half months. Suddenly, the government has slapped a curfew and of course the hugely infuriating thing is that there's no science behind it.” 

BAN ON EVICTIONS

What is it? A ban on evicting commercial property tenants was one of a number of emergency coronavirus measures announced by the government back in March. It has now been extended until to the end of the year. 

What is it supposed to do? Prevent restaurant and pub owners from being evicted from their properties. 

What will it actually do? While the suspension of evictions offers a temporary breathing space for squeezed restaurateurs, without further support for rent and staffing costs – two of the biggest outgoings for any restaurant – the eviction ban can only halt the inevitable. 

“Obviously, it’s just kicking the can down the road and it will get to the stage where the government will pull the plaster off,” Hyman says. “Eventually, people need to stand on their own two feet, a bit like furlough. Because they can't keep propping up this forever.”

Landlords are still entitled to issue debt proceedings on restaurants that can’t pay and in many cases, these debts are simply growing by the day. As London restaurant owner and chef Mandy Yin recently wrote for The Guardian, “only big players with bountiful cash reserves and the most resilient independents will survive the wave of closures that will happen in the next few months without more governmental help, especially in relation to rent.”

After a terrible year of trading, many hospitality venues will have no way to pay up.

@Angela_Hui