Pubs and Stores Say Sunak Budget Lifeline Doesn’t Go Far Enough

(Bloomberg) -- Britain's retail and hospitality industries, among the sectors hardest hit by the pandemic, welcomed support measures included in the U.K. budget, while expressing frustration that the government didn't do more.

Delivering his annual budget with the country mired in a third national lockdown, Chancellor of the Exchequer Rishi Sunak extended relief from business rates -- a form of U.K. property tax -- renewed a government-funded furlough program and extended a reduction in value-added tax for hospitality and tourism.

“This announcement provides some targeted support to struggling businesses,” Helen Dickinson, chief executive officer of the British Retail Consortium, said in a statement. “However, for many retailers the devil will be in the detail.”

In his remarks, Sunak also made it clear that the government largess can't go on indefinitely. He said the corporation tax rate will rise to 25% in 2023, from 19% now, to help repair state finances once the pandemic recedes.

Still, the relief measures bolstered shares of companies from Marks & Spencer Group Plc to pub giant JD Wetherspoon Plc on Wednesday.

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At the start of the health crisis, the government announced a one-year period of relief from business rates, an exemption that was due to expire this month. The tax is a particular burden for traditional U.K. retailers, who have pushed for permanent measures to level the playing field with online merchants.

‘Broken' System

Sunak on Wednesday pledged to provide full relief from the tax through June, and a reduced rate for the subsequent nine months. Those steps don't go as far as Scotland, which extended its relief until next March. British businesses were also disappointed last month when Sunak delayed a promised full reform of the tax until the autumn.

“The business rates system is clearly broken,” said Melanie Leech, CEO of the British Property Federation, in an emailed statement. “When temporary relief ends, the government must be ready with a new regime which best future-proofs the system as our economy continues to evolve.”

Still others complained that the budget hadn't delivered enough support for major commercial centers like London and Manchester, which are missing out on tourism and business from office workers.

“London and Manchester risk losing their lead as world-class destinations to Paris and Milan,” said Jace Tyrrell, CEO of the New West End Co., which represents hundreds of retailers and businesses in London's West End.

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Lisa Hooker, consumer markets leader at PwC, noted that there was no indication of an extension to the U.K. eviction moratorium, which has been a critical measure to help the survival of shopping districts.

The Campaign for Pubs, an industry group, expressed disappointment that the measures didn't benefit all venues equally. Pubs that generate most of their sales from alcohol won't be helped by the extended tax cut on food and overnight accommodation, the group said.

Spur to Invest

Paul Crossman, chair of the group and a publican in York, England, added that directors of limited companies, including small pub businesses and breweries, will suffer by being excluded from income support measures.

Manufacturers in the U.K., by contrast, applauded key measures, especially the extension of the furlough program and the announcement of a tax break to incentivize investments in machinery.

Under the so-called “super deduction” policy, for the next two years when companies invest they can reduce their taxable income by 130% of the cost of that investment.

“Today's announcement should help turbo-charge investment to ensure that those plans turn into reality in the short-term,” said Stephen Phipson, head of trade group Make UK.

‘Massive Slap'

One industry particularly disappointed with Sunak's budget was aviation. Heathrow Airport, which runs the country's biggest hub, said the announcement “ignored” the industry.

“The absence of any meaningful support from the government in the face of tough restrictions, which have ground travel to a halt, will weaken the sector and limit U.K. growth at the time it is needed most,” said John Holland-Kaye, Heathrow's CEO, in a statement.

The British Airline Pilots Association, the country's biggest pilots union, echoed those comments.

“There was not one word of backing for our vital sector,” said General Secretary Brian Strutton. “This is a massive slap in the face for the industry that has supported repatriations, brought in vital supplies and faced never ending changes to restrictions and rules and a total shutdown as a result of government policy.”

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