'We are still holding out for a little glimmer of light'
'If we were told that the intent is there to help us, we could see it as a bit of an olive branch'
Hospitality leaders and owners in Greater Manchester have said they are ‘holding out for a glimmer of hope’ ahead of the Chancellor’s Spring Statement later this week.
Rachel Reeves, Chancellor of the Exchequer, will deliver a statement on Wednesday (March 26) in response to revised forecasts for the economy and public finances from the Office for Budget Responsibility (OBR). it will arrive just days after the Bank of England chose to hold interest rates at 4.5%.
Whilst the Spring Statement is usually an update on what the government is doing in response to the economic situation and despite the fact that Sir Keir Starmer has said there will be no 'big decisions' made, there has still been speculation that some announcements on spending and tax could be unveiled.
With businesses already gearing up for an increase of employers’ National Insurance Contributions (NICs), from 13.8% to 15%, on April 6, there is some trepidation about what could be in store for pubs, bars and restaurants in the country.
Sacha Lord, the Night Time Industries Association chair, said yesterday it was 'tougher now' for the industry than during the pandemic.
“We’re all a little nervous about what is to come,” Phil Rowan, the financial director for community pub operator Joseph Holt, tells the Manchester Evening News of Wednesday’s statement. “The economic climate is not brilliant and we were already hit pretty hard as an industry by the Autumn Budget.”
Along with the announcement of the increase in NICs, the budget also included a decrease in the secondary threshold for NICs - which is the amount that triggers employer liability to pay NICs on an employee’s earnings - from £9,100 to £5,000 per year, which is also effective from April 6.
It was estimated that changes in last year’s budget will equate to an ‘increased annual tax bill of £3bn for the sector’. Kate Nicholls, the CEO of UKHospitality, said ‘the tsunami of employment costs coming in April will ultimately do more to hamper growth than incentivise it’.
At the Northern Restaurant & Bar (NRB) conference at Manchester Central earlier this month, Nicholls said that operators were currently 'facing a really big headwind of costs' following the 'catastrophically bad budget'. She said during a panel: "The halving of the threshold on NICs is a really regressive tax that is going to hit workers the hardest and see businesses struggle to work out how to absolve those costs."
James Bates, the co-founder and MD of QVO Hospitality, which counts the Maray restaurants in Manchester and Liverpool, alongside venues including The One O'Clock Gun and Buyers Club, under its belt, says he has learnt the lesson by now to ‘manage expectations’ in what could be in store for the industry.
“There are some whispers of an olive branch which could include a cancelling or delay of the lowering of the National Insurance threshold,” James tells the M.E.N. “The lowering of the threshold felt like one step too far really.
“We’ve already looked at having to make some price increases this year, whilst still trying to keep things as low as possible. If they did cancel or delay the lowering of the threshold, it just gives us a slight bit of manoeuvrability. We don’t have to look at putting our prices up just as much or giving out less hours to staff.
“If that comes to fruition, it’d be nice, but I know by now that the key to a happy life is to manage expectations.”
Joseph Holt owns 127 pubs in Greater Manchester and the North West alone, including the Ape & Apple in the city centre, the Chapel House in Denton, and the Quadrant in Trafford. Financial director Phil says he is trying to remain positive about the current situation.
The CGA RSM Hospitality Business Tracker revealed that there had been just 0.1% like-for-like sales growth in February for some of the country's leading restaurants, pubs and bar groups. The tracker also highlighted how hospitality margins 'remain extremely tight'.
“Although it’s a difficult climate, we are cautiously positive about our own position really,” he explains. “The last five or six years have been a real up or down but I think we’ve done quite well, alongside many other brewers in the North West and the country. But it doesn’t mean we’ve not had to fight to continue.”
The hospitality business tracker also found that, out of its included venues, pubs continued to perform the best with like-for-like sales 1.7% ahead of February last year. But the wider picture also finds that one in seven pubs are currently closing.
Speaking about what he’s heard from the operator’s landlords, Phil says the feeling is generally also quite positive there too. "They do recognise that people’s discretionary spend is being affected by interest rates,” he explains, “but they are seeing that people do still want to go out.
“What we’ve learnt is that it’s about the attractions we offer - like our Knit and Knatter and dementia groups - ensure people get together with one another more than they might otherwise. It does feel like the pub is one of the last bastions of where people do get together these days, and we try to foster that. We know that the pub is not only somewhere where people just go to drink.”
James says he also agrees that people are still coming out - they are just spending more wisely and that their ‘expectations are higher than ever’. “People look at the bill now and it will be much higher than it was a few years ago,” he explains. “It’s harder to give a perception of value these days so it means we can never really miss a beat. Every facet of the guests’ experience has to be spot on.
“It means there is more pressure on us to make it work. We have to be ten out of ten all the time. We have to invest in the best suppliers, ensure our produce is consistently high quality, and give people a reason to visit us.”
In an ideal world, James said he hopes the Spring Statement would also include a reduction in VAT, although he stresses that he does not expect it to be included. “That drum has been getting banged and there has been almost no noise from the government back on that,” he explains. “It would really give us that much-needed boost and help us out a bit more.
“Even if it was just by a percent or two, it would just show that the government takes the industry seriously. We’re a huge employer and contributor to the tax pot, it would just give that indication that they recognise that input.”
That being said, James says he does have some sympathy for the Government’s position, with Labour having had to quickly deliver their first Budget in 14 years last October. Whilst he tries to understand rationally that they can’t announce a raft of big changes all at once, he would like to see some assurances.
“The government was dealt a bit of a bad hand,” he muses. “I understand there has to be some reasonable expectations on what they can do right away, but I'd really like to hear that, if they can't do things now, what they plan to do when the purse strings aren’t as tight as they are.
“Obviously, reducing the VAT rate from 20% to something like 12% would be great, but some language to indicate change would be welcomed. If we were told that the intent is there to help us even if, right now, the budget cannot, we could see it as a bit of an olive branch right now.
“We are just holding out for that little glimmer of light that keeps us going. Everyone is in the industry for the longhaul so a few crumbs to keep everybody motivated and confident about the future would be really beneficial.”
“We’re hoping we’re not going to be hit by anything left-field and just be able to plan accordingly with our investments and continue to look for acquisitions,” Phil, of Joseph Holt, says of his own thoughts on the upcoming statement.
“In leisure and hospitality, we are very-heavily labour orientated and many of us feel that we’ve been a bit hit by some of the recent announcements whereas your non-labour businesses haven’t as much.
“We hope there might be some easing of the NICs - a delay on that or bringing it in over a longer period of time would really help us all but I can’t see it happening, not at this point. A continued review of hospitality business rates, and bringing that in sooner rather than later, would also be really helpful."
At the NRB event earlier this month, UKHospitality's CEO Kate Nicholls said the organisation would be 'redoubling its efforts' with the government on behalf of the industry. "We will be asking them for an action plan for growth for hospitality," she said. "It's quite clear we’re not going to get any big tax giveaways like we did during Covid, but we’re hoping for small scale changes and help and support that could give operators breathing space."
She added: "They take this sector for granted. Covid showed them how important we are because pre-Covid, nobody talked about hospitality, we weren’t considered a big part."
But, all in all, Phil and James reiterate that they are trying to remain positive about where the industry currently stands. They both agree there is a lot of potential, and a lot of good, happening in venues up and down the country, they just need an ‘extra push’ to help them exceed.
“The macro picture is pretty bad but if you zoom out and look more into it, there are a lot of openings happening right now and things aren’t necessarily slowing down,” James, of Spinningfield's Maray restaurant, explains. “There’s some great people out there doing great things.
“There’s definitely a bright future for businesses that are doing things properly, but it certainly needs the environment to be better so that people can invest in these ideas and so they can create great hospitality venues.”
Phil adds: “Just something on the horizon to help us weather this storm and make us smile would certainly be welcomed. But we just have to wait and see what rabbits are pulled out of the hats to make us all feel a little bit better later this week.”