Spring Budget 2023: how might it impact UK hospitality?
On Wednesday 15th March, Chancellor of the Exchequer Jeremy Hunt announced the Spring Budget 2023. Despite welcome news that draught products will get additional relief from August 2023, other alcohol products are set to rise in line with inflation.
In this article, we look at some of the key points announced in the budget, aiming to explore how these changes might affect the UK hospitality and drinks industry.
Draught Relief
One key takeaway for hospitality was the announcement that Draught Relief will be extended to 9.2%, higher than the 5% duty discount that was due to come in from August.
Dubbed by Hunt as the “Brexit pubs guarantee,” this change means the duty on draught beer and cider in the on-trade will not increase after 1st August and will be up to 11p lower than the duty in supermarkets.
Brexit Pubs Guarantee - Chancellor increases lower duty rate for beer sold in pubs. An 11p differential - need to see full duty rates post August to understand % difference but substantially higher than previously announced.
— Kate Nicholls OBE (@UKHospKate) March 15, 2023
Wine, spirits-based and other fermented draught products will also see an increase in Draught Relief from 20% to 23%. The relief scheme was introduced to reduce the tax rate on drinks sold in on-trade venues from draught containers containing at least 20 litres.
However, overall duty rates will increase in line with RPI from August.
Our reaction to @Jeremy_Hunt's #Budget2023:
— British Beer & Pub Association (@beerandpub) March 15, 2023
✅Duty discount of 9.2% for draught beer
❌Overall duty increase of 10.1%
❌No energy bill support for businesses
❌No business rate reform
See our complete response here: https://t.co/BCsyoBjvqz pic.twitter.com/GmT068T7kA
Other alcohol products to be hit with rise in duty in line with inflation
Despite some positive news for draught products, non-draught alcohol products are set to be hit with big duty increases come August.
According to the WSTA, with the introduction of the new excise duty regime, the new measures mean that the forecast for RPI at 10.1% is being used as the measure for increasing duty rates for all non-draft products from 1st August 2023.
And it looks like spirit and wine producers and drinkers are set to be hit the hardest. Duty on spirits is set to rise by 10%, while still wine will see increases of 20% - the single biggest uplift in duty since 1975. To put this into context, duty paid on a bottle of still wine will go up by 44p. Fortified wines will see even bigger duty hikes, with port set to rise by £1.30 per bottle. Meanwhile, duty on vodka is going up by 76p per bottle.
"These crippling inflationary tax hikes will be lumped on top of stealth tax rises for some alcoholic products, which the Government has built into the move to taxing alcohol by strength."https://t.co/gs2GGldCi9
— The Morning Advertiser (@morningad) March 16, 2023
No further help with energy support for businesses
Despite calls from trade bodies and industry leaders, there was no mention of support to help UK businesses with energy costs for the rest of the year. Although the energy support for UK households is set to continue until June, the current levels of support are coming to an end from 1st April 2023 for businesses.
Currently, operators have support from the Energy Bill Discount Scheme (EBDS), which caps the unit cost of gas and electricity for all businesses. This expires at the end of March. From 1st April, non-domestic businesses in the UK will have the opportunity to access the new Energy Bill Discount Scheme (EBDS) that will see discounts on wholesale energy prices, rather than a fixed price.
This means that hospitality venues, who are already facing energy cost challenges, are expecting to see their energy bills increase significantly from April 2023. The British Beer and Pub Association had released a study ahead of the budget, suggesting that 2,000 pubs in the UK would be at risk of closure, with 25,000 industry jobs also at risk, if additional support was not included in the announcement.
However, UK Hospitality Chief Executive Kate Nicholls has pointed out that the extended energy support for households will hopefully see an increase of disposable income that can be spent in UK bars, pubs and restaurants.
“Maintaining current levels of energy support to consumers, freezing fuel duty and inflation reducing will help hard-pressed households, and increase disposable income, which will be a huge boost for venues in desperate need of trade.”
It’s not over yet
There are some in the industry who feel there wasn’t much positive news for hospitality in the budget announcement. Although the increase in relief for draught products is welcome news, many businesses remain uncertain about their futures with energy costs set to rise from April 1st.
In his Autumn Statement, Hunt confirmed the government would go ahead with a revaluation of properties for business rates and provide a £13.6bn package of support. The multiplier has been frozen for the 2023-24 financial year, with relief for hospitality, retail and leisure businesses increasing from 50% to 75%.
But it's not over yet. Industry leaders have rallied together to call for more support from the government. For example, a petition to reduce to 10% for hospitality has gained over 120,000 signatures. This initiative is hoped to help with cost pressures businesses currently face.
Plus, the announced measures to help people back to work is encouraging. With vacancies running at 56% higher than pre-pandemic levels, the government’s reforms to childcare and the measures to help the over 50s re-enter the workforce will hopefully help fill the enormous vacancies in hospitality.
Big universal credit reforms which will be helpful for many hospitality workers and derisk the decision to take on extra hours. Really helpful and important to allow women and working parents to return to work
— Kate Nicholls OBE (@UKHospKate) March 15, 2023
There’s a lot to digest for the industry and a lot still to campaign for. Time will tell how big of an affect these changes will have on the industry. However, we are hopeful that a busy summer ahead will help give our much-loved pubs and venues a needed boost.
Sources:
Evening Standard
Express
Morning Advertiser
Big Hospitality
Food Service Equipment Journal
About the author
Mary McCarron
Mary looks after the majority of Matthew Clark's digital marketing comms. After a couple of years working in tech, she found her way back to the hospitality industry and can now be found talking all things cocktails, spirits, beer, softs and more across our website, social media, and other digital channels.