AUTUMN BUDGET: Operators tell Philip Hammond they are braced for margin pressure

Autumn Statement 2016

Pubs and restaurants have “cautiously welcomed” new business rates relief unveiled in the Autumn Budget today, but warned that wholesale change to the business rate system is still required.

The proposed hiking of business rates has arguably been the biggest talking point for foodservice operators over the past few months, with many warning that it would hit profits and stop them expanding.

Chancellor Philip Hammond announced today that corporation tax will be reduced to 17%, while small businesses in rural areas will be awarded a tax break worth up to £2,900 per year by increasing the Rural Rate Relief.

Communities secretary Sajid David was due to announce business rates relief for other companies this afternoon.

The Association of Licensed Multiple Retailers, which represents more than 23,000 pubs and restaurants, welcomed the lowering of transitional relief caps and the increase in rural relief, but claimed it still fell “far short” of the wholesale change that many businesses are looking for and that some will need in order to invest and grow.

Chief executive, Kate Nicholls, commented: “The Government has indicated that further announcements on rates are to be made by DCLG and we hope that this will provide better news and a more productive step towards tackling rates bills that are a serious difficulty for many businesses.”

Last week, we revealed how Young’s pub group fears the revaluation of rateable values could cost it £1.8m a year. The group, which operates almost 300 managed and tenanted sites, said the fee would be added to its annual cost base.

Hospitality firms have also been waiting with baited breath to find out how much the National Living Wage will increase by.

Philip Hammond said today that it would increase from £7.20 to £7.50 in April next year, equivalent to a rise of more than £500 a year to the full-time worker.

“The increase to the rate of National living Wage is lower than previously forecasted and will put money back in the pockets of our customers, but will still tighten margins for businesses and some will struggle to afford it,” said Nicholls.

“If wage rates are to be affordable and equitable, the Government must step away from a policy-driven rate and ensure that any increases are independently set by the Low Pay Commission reflecting the economic landscape.”

Yesterday, Mitchells & Butlers admitted it expects to face “downward pressure” on margins next year as the industry is forced to deal with wage increases, higher business rates and ongoing exchange rate movements on foreign currency. It said it was working hard to take mitigating action against the additional “cost headwinds” the sector will incur.

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