Restaurant bosses have written to the Chancellor, Phillip Hammond, ahead of this week’s Spring Statement, calling for a dedicated Minister to represent the industry and to work on a plan for growth.
The letter comes as high-end burger chain Byron, Jamie’s Italian, Strada and Prezzo have all announced store closures in recent weeks with Carluccio’s now calling in accountants to advise on possible strategies.
In the letter, signed by a host of top names, bosses warn Hammond that the sector is at a “tipping point” and needs focused attention.
The signatories to the letter call on the government to make the hospitality sector a priority by taking immediate action to “reduce the unnecessary costs of doing business if we are to avoid damaging closures and job losses”.
Bosses have demanded action on business rates saying that “the system needs to level the playing field, support high street businesses and incentivise investment.”
Real estate advisor Altus Group forecast, with transitional relief and inflation, over the full five years of the new rating cycle which came into effect last April following a revaluation, restaurants will pay £2.95 billion in business rates representing a five-year tax increase of £652.91m, which equates to an average tax rise in rates of £24,133 per restaurant over five years.
Steve Richards, CEO of Casual Dining Group, one of the UK’s largest restaurant groups, employing more than 10,000 people across 300 locations under brands such as Bella Italia, Café Rouge and Las Iguanas, is one of the signatories. He warned: “Our business, along with many others operating in the hospitality sector up and down the country, is set to be saddled with inflation-busting business rate hikes next month.”
He added that high business rates “stifle the sector’s growth potential and ability to create more jobs”.
Richards’ concerns come as 8,000 restaurants in England will face tax rises above the rate of inflation next month for the property taxes that they pay through rates to their local councils according to Altus Group.
Kate Nicholls chief executive of UKHospitality, which represents the sector, echoed those concerns, noting that April will see the biggest business rates increases in a decade. She commented: “With cost pressures continuing to squeeze many businesses and with the UK’s withdrawal from the EU fast-approaching, the time is right for the government to provide decisive support for hospitality businesses.
“The government has indicated that it will provide the support we want, and that it will undertake a review on business rates, but pubs and restaurants are still overpaying £1 billion in year in rates. We want to see the government push ahead with its promised review and begin to fashion a regulatory system that supports hospitality businesses and supports growth.”
Business rates bills for restaurants across the country began hitting doormats last month but, according to Altus Group, 3,220 small restaurants, 3,888 medium sized restaurants and 782 large restaurants in England will all see tax rises for 2018/19 greater than last September’s 3% CPI rate totalling tax rises of £26.45m as large increases in bills in England are phased in.
The ‘caps’ for 2018/19 “limiting” increases in bills are 7.5% for small properties, 17.5% for medium and 32% for large properties to which the effects of last September’s CPI is then added creating a double whammy of tax rises.
Alex Probyn, president of UK business rates at real estate advisor Altus Group, said: “There has been huge growth in the casual dining market with restaurant numbers up 15% overall since 2010. The race for space has pushed up rents impacting on rateable values. Extra tax for business rates coupled with rising food prices and staff costs through increases in both the national and minimum wages are creating a potentially lethal cocktail as margins are squeezed.”
At the start of the previous business rates regime in April 2010, there were 23,450 restaurants liable for business rates across England and Wales and today that number is up 3,605 to 27,055.
The letter to Phillip Hammond:
Recent weeks have seen a disappointing flurry of restaurant venue closures as a result of the perfect storm of soaring business rates, rising employment costs and Brexit-fuelled inflation that is hitting the UK’s hospitality industry.
Our outlets are the lifeblood of our high streets, towns and villages, and have long driven regeneration and employment in local communities. We have grown by almost 10% year-on-year and our businesses have accounted for 2% of all UK capital investment.
Hospitality is a key economic driver of UK plc, accounting for 10% of UK employment and 5% of GDP. We are double the size of financial services, have a turnover greater than fashion and creative industries combined and our tax contribution to the Exchequer is equivalent to the entire defence expenditure budget.
We need government action now to reduce the unnecessary costs of doing business if we are to avoid damaging closures and job losses. Ahead of the Spring Statement, we ask the Chancellor to implement a root and branch reform of the business rates system. The system needs to level the playing field, support high street businesses and incentivise investment. At this critical time for the UK economy and in the run up to Brexit, hospitality must be a priority.
We are also calling for a dedicated Minister to represent our industry, to hear our voice and work with us on a plan for growth. The sector is at a tipping point and needs focused attention now.
Nick Varney, Chief Executive Officer, Merlin
Steve Richards, chief executive officer, Casual Dining Group
Duncan Garrood, chief executive officer, Bills
Patrick Dardis, chief executive officer, Young’s
Toby Smith, chief executive officer, Novus Leisure
Peter Marks, chief executive officer, The DelticGroup
Bob Ivell, chairman, Mitchells & Butlers
Ian Neill, chairman, K10 Restaurants
Peter Borg Neal, chief executive officer, Oakman Inns& Restaurants
Alex Salussolia, managing director, Glendola Leisure
Paul Wigham, chief executive officer, All Our Bars
Kevin Sammons, managing director, The Pub PeopleCompany
Sarah Weir, managing director, Albion & East
Ian Coll, founder and managing director, MamuskaRestaurants
Suzanne Baker, commercial director, Stonegate Pub Company