A STRATEGY TO SAVE BRITAIN'S HOSPITALITY AND HIGH STREET ECONOMY - AILING PUBS, DESERTED RESTAURANTS AND VACANT HIGH STREETS

AILING PUBS, DESERTED RESTAURANTS AND VACANT HIGH
                      STREETS:
A STRATEGY TO SAVE BRITAIN'S HOSPITALITY
       AND HIGH STREET ECONOMY

Executive Summary

The Independent Business Network believes that the current support being offered to the
Hospitality sector is insufficient. It is by far the sector that has been the hardest hit by
successive lockdowns and tiered restrictions, yet the tailor-made support offered to it has
been non-existent.

As far back as March last year, the Government had demonstrated a failure to truly
comprehend the manner in which ‘static hospitality’ sector – pubs, restaurants, events
companies, and eateries – actually functioned. The result has been a series of missteps that,
whilst embarrassing for Secretaries of State, have had a terminal affect on many small
businesses across the country. As such, the purpose of this paper is to introduce a clear
blueprint through which compensation can be administered. The implementation of a
‘Regeneration Window’, that waived some of the more traditional taxes and hurdles the
sector faces, and worth approximately £28 billion, would stave off mass-bankruptcies, and
put in place a future framework within which hospitality can “bounce back”.

Firstly, all hospitality businesses that made significant financial sacrifices when welcoming
back customers last summer. By the time the public had flooded back to pubs and
restaurants they were greeted with Perspex dividers, well-regimented sanitation processes,
registration apps, socially distant and trained staff, and a host of other measures. At a
business-level, these features came at a significant cost. The IBN proposes that a rebate
system, worth £690 million, is put in place.

Secondly, hospitality specific taxes such as alcohol duty and the 19% alcohol VAT rate must
be eased. Britain’s alcohol duty regime has long been excessive. Even a reduction of 27p per
pint would make a considerable difference for thousands of small pubs and restaurants,
whilst still being one of the more expensive European rates. Similarly, as done elsewhere on
the continent, ‘hospitality served’ alcohol should be included within the reduced VAT rate of
5%. Putting more money in the pockets of landlords and allowing the British public to enjoy
cheaper prices. On top of this, investment should be encouraged with a short-term
introduction of a 100% FYA rate.

The fate of many pubs and restaurants is entwined with the fate of Britain’s high streets. As
such, the IBN believes that it is not just the retail sector which would stand to benefit from a
continued abatement of business rates, a reduction of the VAT payable by physical retail
stores, and a freeze on car parking charges. These measures are a small and much needed
step towards salvaging Britain’s town centres and high streets. Many pubs and restaurants
would be natural beneficiaries of this increased footfall.

Since March of last year the UK government has spent £156 million of a marketing and
advertising campaign that has stigmatised the key pillars of the hospitality sector: mass
gatherings and crowded rooms. Polling shows this has had a significant impact on consumer
behaviour. Once restrictions are eased, the government must commit to an equally
prevalent advertising campaign, coupled with a new and improved ‘eat-out-to-help-out’ to
rekindle Britain’s love for the pub.

Introduction
The hospitality sector is in quite evident need of auxiliary support. It has been the sector
most directly damaged by the ‘hawkish’ approach of health officials to lockdown. As
reported by HospitalityUK, the sector has lost £53.3bn in the last year and the 3million
employed by the sector have faced overwhelming insecurity. Not only this, but it will
continue to suffer the ramifications of the government’s 2020/2021 policy decisions long
after other industries have returned to normality. In particular, the government must make
special dispensation for the pubs, restaurants, eateries, and event/catering companies - or
‘static hospitality’ businesses - that have been brought to their knees by successive
lockdowns and tiered restrictions.

The Independent Business Network believes there is now a strong case to be made for the
static hospitality sector to receive compensation from the government. The purpose of this
report is to highlight that the government has an obligation to the sector that is more acute
than its obligations to other parts of the economy. It then sets out the mechanism through
which this compensation should be delivered, namely in the form of a ‘Regeneration
Window’. This would be a period of time within which the government alleviates most of
the traditional burdens borne by the static hospitality sector and makes efforts to reset the
consumer habits that have been undeniably altered by 10 months of stringent government
messaging.

Many, such as the Institute of Directors, have warned of a “springtime cliffedge” for many in
the hospitality sector, who will be unable to survive if left in the lurch by government
support. Even before the emergence of Covid-19, and the ensuing crisis of government, the
static hospitality sector faced a series of unique hurdles that placed it at a chronic
disadvantage to a) other sections of the British economy and b) static hospitality sectors
across Europe. It is simply not an acceptable long-term plan to expect British static
hospitality to emerge from lockdown, only to then face the hostile environment of harmfully
high business rates, alcohol taxation, and plummeting high-street footfall.

The case for compensation
The state of emergency in this sector has seemingly now been recognised by the
government, with most businesses now entitled to an additional grant of £4,000. The total
package, worth around £4bn, has undoubtedly been a sign that the government recognises
the precipice upon which so many otherwise viable businesses teeter.

However, these grants are not, in and of themselves, solutions to the crisis. The government
must now also recognise the need for a wholesale ‘Regeneration Window’ to allow British
hospitality to bounce back stronger. Failure to take action beyond the current sticking
plaster measures would lead to the inevitable conclusion that the government’s approach to
hospitality is superficial at best. The government has thus far committed £322 billion to
keep these businesses on life support. With the injection of this proposed £28bn package,
the government would be able to unhook static hospitality from its current state of
dependency and allow it to flourish under a regime of self-sufficiency.

A long-lensed view of the last 10 months shows a litany of entirely avoidable crises that
have beset the hospitality sector. In many instances, the turmoil can be attributed to
government mismanagement. As such, the government must ensure that it makes
recompense. This is the only viable course of action that would stave off irreparable damage
to a vital part of the UK economy that in calmer times has a productivity rate that is twice
the UK’s average. On top of this, the long-term benefits would be considerable and would
stem from an ecosystem where the hospitality sector operated with greater independence,
and therefore with greater efficiency.

                                          Insurance

In March 2020, as cases in the UK began to rise for the first time, the Government delayed
in declaring Covid-19 a “notifiable” disease, leading to serious strife with many pubs unable
to make insurance claims until this declaration has been made. This incompetence was then
exacerbated when the Government began demanding that consumers avoided pubs, bars
and restaurants but did so without making it a legal requirement for these venues to close.
On the 16th March, Boris Johnson urged people to stay away from hospitality venues. It was
not until the 20th that pubs and bars were instructed to pull down the shutters. This caused
a 47% year-on-year drop in footfall, even before the first lockdown was actually announced.
It was described as a “passive aggressive lockdown” that left businesses “no recourse to
insurance”.

It is now clear that the government had not considered the insurance implications for the
static hospitality sector at all. A level of naivety seemed to have overwhelmed the
government and a large part of their initial lockdown policy incorrectly assumed that
insurance companies would pick up the tab. The crisis that pubs and landlords have faced
with insurance firms shows that this was not the case. As it stands, insurance policies worth
£1.2 billion have been contested in the Supreme Court by the FCA. This uncertainty, and
chaos is a far cry from the sureness with which the government approached the matter in
mid-March:

"There are concerns about the impact on pubs, clubs, theatres and other hospitality, leisure
  and retail venues. Let me confirm that, for those businesses which do have a policy that
 covers pandemics, the Government's action is sufficient and will allow businesses to make
              an insurance claim against their policy." - Rishi Sunak, 17th March

At the time, the government acknowledged that there would only be a small number of
hospitality sector businesses able to make a viable insurance claim against a pandemic.
However, rather than introduce tailor-made and targeted measures for the remaining
hospitality businesses, it merely pointed them in the direction of the government’s one-size-
fits-all offerings.

                                     The 10pm curfew

The debacle over the introduction of a 10pm curfew is perhaps totemic of the knee-jerk
approach to the covid-19 pandemic. It is now widely recognised that the government
introduced this measure with “no hard evidence” in the words of Patrick Vallance, without
having consulted with SAGE, and with little consideration to the crowds which invariably
ensued after closing time.

The crowded scenes outside of London tube stations were of course a failure of health
policy. From an economic perspective, the curfew was found to have cost pubs just shy of
£50 million per week owing to reduced capacity service time. The curfew lasted in this form
from 24th September until 5th November - a total of 6 weeks. This means that simply by
enforcing a 10pm curfew rather than allowing pubs to stay open until their usual closing
time, £285,138,090 was senselessly taken out of the hands of the pub sector for no
discernible public health advantage. The damage of this ruling was revealed by the fact that,
if it had been allowed to continue into 2021, the curfew could have cost the United Kingdom
£7bn.

                                The loss of Christmas custom

The cancellation of the Christmas holiday trading period snatched away from many pubs
and businesses a vital period of trading. For many, during the dark days on the November
lockdown, it was the prospects of the Christmas period which offered a saving grace. Once
they were ordered to remain locked down, however, the static hospitality sector lost its one
ray of light. It had already been anticipated that the sector’s December trading would be
90% lower than in previous years, and that £650 million would be lost through depressed
sales. The last-minute U-turn, which sentenced swathes of businesses across the south of
England into Tier 3, also came with a substantial cost for thousands of landlords and
managers who had ordered stock in advance of this period of trading. The result was that
millions of pounds worth of food was wasted, and that employees were given just 48-hours’
notice that their services would no longer be required. The emotional and financial toll
which this will have placed on the shoulders of thousands has yet to be quantified, but there
should be no doubt that community venues will have been massively scarred by the
prevarication.

The Regeneration Window

The Independent Business Network, having calculated the expected cost of this raft of
measures, deem it appropriate for the government to commit to the hospitality sector, a
compensation regime worth around £35 billion and distributed during the course of 2021
through the delivery mechanisms set out below:

    •    Provide hospitality businesses with a Covid-investment rebate - £690 million.
    •    Extend hospitality’s reduced VAT rates for remainder of 2021 – £6.3 billion.
    •    Include alcohol in hospitality’s reduced VAT rates - £750 million.
    •    Cut in half Britain’s alcohol taxes – £1.8 billion.
    •    Make hospitality investments 100% FYA - £1.15 billion.
    •    Continue the suspension of business rates 2020/2021 - £15 billion.
    •    Suspend town centre parking fees - £897 million.
    •    Extend the reduction of VAT to physical retail - £7.5bn
    •    Reintroduce ‘eat-out-to-help-out’ and complement it with a ‘pro-hospitality’
         advertising push - £1.08 billion

This report is working from a worst-case scenario that stringent restrictions are in place until
the middle of March. By this time, it is expected that the most vulnerable in society will have
been vaccinated, and that graphs and bar charts - the blunt tools that have hitherto been
used to bounce politicians into lockdowns - will begin to show that case rates have fallen
since 5th January. At this point the arguments against severe restrictions will have been
eliminated, and the reasonable course of action will be to reopen the economy. Of course,
this assumption cannot account for ineptitudes of governance or the efficiency of vaccine
delivery, and if lockdown measures are to persist beyond the end of March the figures in
this report would need upscaling to reflect this fact.

If we were to enter a situation whereby most of the current restrictions had not thawed, it
is essential for the government to produce an economic cost-benefit analysis. In July 2020
Professors of Imperial College London and the University of Manchester attempted such a
venture and concluded that “the costs of the three-month lockdown in the UK are plausibly
so high relative to likely benefits that a continuation of severe restrictions is very unlikely to
be warranted.”1 Robert Rowthorn and Jan Maciejowski of the University of Cambridge
performed a similar analysis and reached largely the same opinion: “A lockdown may (or
may not) be necessary to halt the explosive spread of the disease, but once this aim has
been achieved it would be a costly mistake to stick with expensive social distancing policies
that aim to keep r well below 1”. 2
However, as we know, the dominance that SAGE has held over public policy – largely
permitted to occur because of caution and a dearth of alternative policy ideas in the Cabinet
- has had a distortive effect on Government priorities. As the coronavirus has progressed,

1
  “Stay at Home, Protect the National Health Service, Save Lives”: A cost benefit analysis of the lockdown in the
United Kingdom - Miles - - International Journal of Clinical Practice - Wiley Online Library
2
  A cost–benefit analysis of the COVID-19 disease (nih.gov)

the government’s policy of “following the science” has resulted in it shunning the
economics, disregarding the mental health crisis, and abandoning the hospitality sector. The
recently debated idea of a ‘Minister for Hospitality’ would have been a vital corrective to
this imbalance. On January 11th, MPs voted in favour of the motion; a strong endorsement
of the ‘Seat at the Table’ campaign’s push for more visibility of the wider crises beyond
Covid.

1: Rebate for Covid-Equipment
The most pressing issue in need of redress - that would be of immediate benefit to smaller
enterprises – is a rebate for the safety equipment that was purchased on mass by pubs and
restaurants. During the first lockdown the government position was that, once the spread of
the virus had been curtailed, the hospitality sector would remain open. Restrictions were
put in place, but the tenor of the announcements was that the sector was now on a forward
moving convey belt towards normality. Instead, the end of the first lockdown merely
heralded a period of further confusion and sporadic convulsions back into lockdown.
Appreciating that there would be several months within which they had been entrusted
with a responsibility to minimise the spread of the virus, pubs, restaurants and catering
companies made significant outlays into protective furniture, PPE, procedures to aid the
government’s track and trace, thermal measuring software, mobile ordering apps and the
like. The national spirit that had seen the first lockdown so universally accepted was
continued by the static hospitality’s approach to reopening. However, it is also undeniably
the case that many in the sector felt a great deal of confusion about the exact measures the
government expected them to take. It was found that 56% of pubs were in urgent need of
more guidance as to what processes needed to be installed3. On the 4th June, pubs and
hospitality venues across the country were clamouring for greater government guidance,
stating that at least three weeks’ notice was needed in order to ensure the necessary
preparations were made. With ‘super Saturday’ being the 4th July, this would have meant
that information from the government was needed by the 13th June at the latest, a deadline
that BEIS assured companies it was “on track” to meet4. In actual fact, the much-needed
guidance was released 11-days later than this deadline, on June 24th. Giving the hospitality
sector just over one week to prepare5.
This lack of clarity greatly hampered the efficacy of the investments that the hospitality was
making. Without a clear blueprint as to what social distancing rules were to be expected of
them6, if all service was to be table-service only, and what constituted “outdoor seating”,
pubs were kept in the dark. This essentially meant that businesses were having to make
financial outlays, but without confidence that they were spending on the right things.
Data surrounding the average outlay per pub for this process in scarce. However, using
figures provided by two of the UK’s largest pub chains – JD Wetherspoon and Greene King –
we are able to make an estimate at the average outlay per establishment. Across its 874
pubs, JD Wetherspoon spent £11 million fitting Perspex screens, reconfiguring bar layouts,
and ‘covid proofing’ buildings of various sizes and structures. This is the equivalent of
£12,500 per venue. Meanwhile, Greene King spent less per individual unit – approximately
£8,800 per pub7. Smaller chains, such as the hotelier Amaris spent £20,000 on each of its

3
  How many pubs will reopen on 4 July? (morningadvertiser.co.uk)
4
  Pubs say 'time running out' to be ready for 4 July reopening : CityAM
5
  Pubs, restaurants and hairdressers to reopen from 4 July - GOV.UK (www.gov.uk)
6
  It was eventually decided, last minute, to cut social distancing to 1m following pressure from BBPA.
7
  £15 million in Pub Safe measures spend revealed by Greene King - Hospitality & Catering News
(hospitalityandcateringnews.com)

properties8. When looking at ONS investment figures for the second quarter of 2020 (April,
May, June), it is a fair assumption to make that large portions of the £220 million invested
by the “hotel and restaurant” category was spent on covid infrastructure and equipment.
Indeed, at that time, what other substantial investments would most businesses have been
making?
These figures do not account for increased operational costs as a result of these measures
that are much harder to quantify. It is the view of the IBN that an appropriate level at which
to set the compensation rate is at a maximum of £10,000 per individual hospitality business,
the government would need to provision for a potential 69,000 claimants. In sum, this
rebate programme would cost £690,000,000.
By doing so, the government would be acknowledging the agony that its dithering has
inflicted on pubs and restaurants. It would also be a recognition of the fact that the onus
must eventually fall onto the shoulders of private enterprises to ‘covid proof’ the parts of
society currently prevented from opening. By applying a retrospective rebate system to the
hospitality sector’s first wave of covid-investment it would be sending a clear signal that
enterprises across the country will have the government’s backing in taking measures to
improve public safety.

8
    Amaris invests 600000 in health and safety... - The Caterer

2. Make hospitality taxation equitable
                                                    VAT
It is quite evident the government must extend the hospitality VAT reduction, and maintain
the current 5% rate, beyond the end of March (as is currently provisioned) and at least until
the end of 2021. The initial 6-month reduction, from July 2020 to January 2021 ‘cost’ the
government £4.1bn in forfeited tax receipts. In reality, this money provided many
establishments with much needed working capital. The nature of debate in Parliament
seemingly makes it inevitable that this will now be extended. A similar offering from April
2021 – December 2021, as is being pushed for by many in the sector9, and is morally
necessitated, could therefore be expected to cost about £6.3bn.
However, the Independent Business Network believes that more must be done. Rishi Sunak
must now go further and include the sale of alcohol within this reduction. It was a cause of
great dismay for many – wet led pubs in particular – that alcoholic drinks were not included
in last summer’s VAT holiday. This time around, it is vital that the government – with its
obligations to the hospitality sector – deploys every lever available. To have not included
alcohol in the VAT reduction is purely a political choice. Elsewhere in Europe the decision
has been made to reduce VAT on alcohol. Germany, for instance, cut its rate from 19% to
16% in July 202010. Of course, a key benefit of having left the EU’s single market is the ability
to apply these measures for longer without relying on permission from the European
Commission.
If, during the eat-out-to-help-out scheme, the government had allowed pubs to absorb a
15% VAT cut to alcohol into their profit margins, then on brand sales of alcohol could have
contributed an additional £30 million for Britain’s establishments in August, purely through
the sale of beer. Introducing a year-long cut in alcohol VAT for hospitality venues would
overnight breathe £360,000,000 into the profit margins of companies’ balance sheets. With
this windfall there is then the scope for the hospitality sector to return to its role as a major
employer of under-25s, to reduce its prices to more competitive levels, or to recapitalise. Of
course, this figure does not make mention of spirits, wines and ciders, but in total it is
acceptable to anticipate that the reduction of VAT on alcohol products would provide
hospitality businesses with an additional £750,000,000 over the course of 2021.
Announcing now the continuation of the VAT reduction, and the inclusion of alcohol within
in, will give establishments more time to take appropriate measures. Knowing ahead of time
that this offering is on its way will allow time for new menus to be printed, for accounting
procedures to be installed and for contracts with suppliers to be negotiated more
favourably. As will be discussed later, it will also allow for advertising campaigns based
around reduced consumer prices, to be formulated.
                                               Excise duties

9
  Tiers announcement reaction UKHospitality: “act now or face hospitality bloodbath” - Hospitality & Catering
News (hospitalityandcateringnews.com)
10
   Beer boss: Lowering VAT on alcohol would help hospitality sector revive quickly – EURACTIV.com

The problem of Britain’s alcohol duty rate, and the undue burden it places on food and drink
venues, has been the source of near constant debate since the Labour Party’s introduction
of an excise escalator. Whilst successive Conservative Chancellors have since taken
measures to somewhat lessen the negative impact that this has had on the hospitality
sector, it has not been enough to prevent mass closure of pubs.
Britain’s alcohol duty rates currently force static hospitality businesses to compete on an
unlevel playing field with off-trade outlets. As the government embarks on its manifesto
commitment to review the structure of alcohol duty it must seek to rectify the blatant
discrimination that community venues face. Since the 1980s, off brand alcohol sales in
Britain have grown markedly, whilst the hospitality sector has seen its market share
increasingly cut. The concern for policy makers must be that, given the change in consumer
behaviour caused by the pandemic, supermarkets in particular are able to carve out an even
larger portion of the alcohol market. This would be disastrous for British hospitality, local
community venues, and public health as alcohol consumption would be moved to the
unregulated environment of people’s front rooms rather than public venues.
A distinct alcohol duty rate for ‘hospitality purchased’ alcohol should be seen as an avenue
through which many businesses can regain a market foothold. Such a scheme would directly
reduce the rate of excise tax faced by brewers on the production of draught beer and would
create a system of rebate for bottles and cans that are sold and consumed on the premises
of hospitality businesses or provided by catering companies. The UK is currently an outlier in
that its alcohol duty rates far exceed those in other similar sized European countries, and a
substantial reduction would – at the very least – bring us towards the continental median.
The current government receipts from all four categories of alcohol duty (wine, beer, spirit,
cider) is £12.1 billion. Based on analysis of HMRC numbers it has been estimated that 70% of
alcohol sales are off trade, with the remaining 30% of sales involving venues such as pubs,
bars, and restaurants. The IBN calculates that on-trade venues currently pay approximately
£3.63 billion in alcohol duty. By cutting the hospitality rate in half, from 54p a pint to 27p,
the government would be leaving £1.8bn in the hands of publicans and restaurateurs. This
money would allow pubs and restaurants to rebuild cash reserves, to begin the gruelling
process of alleviating some of the debt burden that they have accumulated and would
ultimately place them in a stronger position to continue contributing to the Treasury coffers
long term.

Table 1: Amount of excise duty applied to a 5% pint of beer. 10 largest western/central
                                 European economies

 £0.60

 £0.50

 £0.40

 £0.30

 £0.20

 £0.10

 £0.00

                           Beer duty on a pint   Proposed hospitality rate

                                      Capital recovery costs
During the Regeneration Window the government must not take measures that prevent
future investment within the hospitality sector. It is vital that the enterprises slowly
beginning to re-emerge from lockdown are encouraged to continue improving their
productivity and output. The sector, that once had a GVA rate more than twice the national
average, will undoubtedly be suffering from social distancing measures and other such
social protocols. It is therefore vital – from both an economic and health perspective – that
pubs, restaurants and events companies are able to invest in the equipment that will allow
them to adopt.
To encourage investment the government would be best placed to remove corporation tax
in its entirety, as proposed in the IBN’s ‘Industry and Trade Strategy’. However, such a move
may currently be politically unfeasible. Nonetheless, the burden that the UK’s overly broad
tax base, and its stringently ungenerous capital allowance, should be allayed. The most
convenient way in which this can be done is through a reform of the capital cost recovery
regime for all businesses that are classified as falling within the ‘Hospitality’ sector of the
Standard Industrial Classification (SIC). The main categories which would fit this description
are SIC 55 and SIC 56: “Accommodation, food and beverage service activities”.

ONS statistics show that the annual Gross Fixed Capital Formation of these two
classifications was £4.7 billion in 2019 across categories such as ‘machinery’, ‘ICT’, and
‘Software. However, the companies making these long-term investments were penalised by

a depreciation regime which is one of the most pernicious in Europe. The Government
should allow the hospitality sector to include these investments within a 100% First Year
Allowance (FYA), rather than requiring that they claim it back over several years. Currently
100% FYA measures have a disproportionate focus on enabling ‘green investments’. This has
created a tiered approach to business investment, allowing companies capable of
purchasing the more expensive green technology to avoid the pitfall of a four-year write-off
programme and therefore incur a more lenient tax bill.
By extending this benevolence to static hospitality, pubs and restaurants would be able to
make investments knowing that they will not be economically punished. This would liberate,
according to IBN calculations, the £893 million currently falling prey to the UK’s far-reaching
corporation tax system. It could be expected to increase the rate of investment in the
sector, reenergise the productivity boom that it had been experiencing pre-pandemic, and
allow pubs, restaurants, and events companies to take the necessary decisions that will give
them a fighting chance.

3. Save the high street
The fate of the hospitality sector in intimately tethered to the future prospects of Britain’s
high streets. In the view of the IBN, the two react and interact with each other. A strong
retail presence in Britain’s high streets increases footfall for the hospitality businesses,
whilst the availability of pubs and restaurants encourages customers to also partake in retail
shopping. These two issues meet at a juncture where they share similar solutions. By
continuing with the business rate holiday and clamping down on excessive parking charges
the government would be taking steps that primarily help physical retail stores. However, an
incredibly desirable secondary effect of this is that many thousands of hospitality businesses
will also benefit.
                                             Business Rates
The Independent Business Network wants to see a strong revival of our High Streets led by
family run and family-owned businesses. They make up the backbone of the British economy
and will lead the recovery.
Covid19 and the government-enforced lockdown have placed unprecedented pressure on
family owned and family run businesses up and down the country. The constant changes in
government regulations have driven up unemployment, created instability and uncertainty
and has not enabled businesses to plan for recovery. We urgently need change.
Business Rates11 are one of the biggest burdens on businesses that require a venue to
operate. The British Retail Consortium has called for the existing system to be reformed.12
Local councils are responsible for collecting business rates and they are charges on non-
domestic properties. Once collected, Councils are able to keep half of the rates collected,
while the remaining half is accounted by central government.13
Earlier this year, the Chancellor announced that all businesses with a rateable value of less
than £51,00014, would be exempt from business rates. This was an unprecedented measure
to support businesses through the pandemic. As restrictions have continued into 2021, the
same leniency must be introduced until the end of the year and business rate suspended
again, with an estimated cost of £15 billion.
As a short-term measure this would be sufficient. However, a fundamental review must be
undertaken of the extremely controversial and unpopular system of business rates.
The House of Commons Treasury Select Committee held in inquiry in into the impact of
business rates on business.15 And concluded “the current approach to business rates acts as
an immediate significant disincentive to investment.” Professor Shackleton, of the Institute

11   https://www.gov.uk/introduction-to-business-rates
12   https://brc.org.uk/priorities/business-rates/
13
  https://www.gov.uk/introduction-to-business-rates/how-your-rates-are-calculated
14
  https://www.cityam.com/business-rates-cut-for-more-small-leisure-and-retail-firms/
15https://publications.parliament.uk/pa/cm201919/cmselect/cmtreasy/222/222.pdf

for Economic Affairs, has supported this view that said, “Business rates place a far greater
cost on businesses that need a physical presence to trade. As such they threaten high street
shops.”16
With the uncertainty about the extent and speed of our economic recovery and with more
people working from home, the current business rates model is unsustainable. However,
some professions will require the use of commercial property such as factories, hospitality
and some retail even after the pandemic has cleared. These businesses will face particular
disadvantages and may be compelled to take a higher burden of the tax bill.
It is time for fundamental reform of the system. Our High Streets are facing an emergency
from which they may never recovery. The government must act now to revitalize business,
support our High Streets, and empower the hospitality sector.
Recommendations
     1. That government should consult with business, local authorities and business
        associations to replace the current business rates model by the time of the 2024
        general election.
     2. That the Chancellor should extend the abolition of business rates in the 2021 Budget
        for a further year.

                                          Parking Charges
As we move into the recovery from Covid19, local government must play its part in supporting
local high streets and not act as a barrier to jobs and growth. There are many things that local
councils can do to support business. A key issue that many businesses in town centres face is
that of unfair and high parking charges. A recent report by the Federation of Small Businesses
found that seventy percent of small businesses on the high street believe that enhanced
parking would make the biggest difference to the high street.17
No reasonable individual would dispute the notion that parking in a town centre must be paid
for, not least to cover maintenance and security costs of the car parking facilities. However,
local authorities should not be using parking income as a revenue supplement to support their
base budget and it should certainly not be a method by which councils seek to make a profit.
Governments impose tariffs on goods entering a country to limit their impact on domestic
production and consumption. Parking charges are essentially a town centre tariff imposed by
local government on residents wishing to enter town centres to access retail, hospitality and
other commercial outlets. Residents already pay their Council Tax to cover the costs of basic
services in their locality and so should not have to face burdensome extra costs to move about
their community.
Increased footfall in town centres drives up income for local authorities without parking fees.
By spending their already taxed income, shoppers are ensuring that businesses are able to

16 https://iea.org.uk/media/business-rates-are-a-poorly-designed-tax-in-need-of-reform-says-
professor-len-shackleton/
17 https://www.fsb.org.uk/resource-report/streets-ahead.html

make a profit to pay their business rates and commercial rents, many of which are paid to the
local authority. If town centre businesses succeed then unemployment locally is reduced
removing costs for welfare, homelessness and other social costs to the local council.
Some council are now profiting from parking charges18 with councils making £897million
profit. High fares deter shoppers from going into town centres especially when many retail
parks and out of town shopping areas offer far more competitive parking prices that give
better value for money. Every pound taken in parking charges is a pound less spent in family
run and family-owned businesses in our high streets and town centres. A report by the British
Parking Association found that the biggest determining factor by consumers on the issue of
parking is the cost.19
Government guidance on parking provision states, “Parking policies, including enforcement,
should be proportionate and should not undermine the vitality of town centres.”20 Despite
this guidance from central government, many local authorities are pursuing parking policies
that impact negatively on the vitality of town centres. A report commissioned by government
entitled “The High Street Report,”21 called on local authorities to review their parking
arrangements to ensure that existing arrangements support access to business. Given the
pandemic, and the urgency to restore vibrancy to out high streets such a review is required
again. Every disposable penny needs to be directed to consumer spending and not
accumulated by local government.
Recommendations
1. Government to pass legislation freezing parking charges for 2020-2021 – costing £897
   million - and to only allow a 1% annual increase for the next five years for car parking,
   parking permits, and associated fees whilst putting in place measures for further
   consultation.
2. Government to amend its guidance to local authorities requiring local government to
   ensure their parking policies precludes the ability to make a profit and to ensure revenue
   generated is only allowed to cover costs.
3. Government to order local authorities to urgently review their parking policies to ensure
   that their local policy acts as support rather than a hindrance to business.

                           Adopt a ‘Bricks AND clicks’ policy position

Physical retail is persecuted by lockdowns whilst online outlets have nationwide custom
funnelled towards them. This is an artificial equation, and one that has been inflicted on
physical outlets through no fault of their own. Similarly, the windfall within which online

18 https://www.dailymail.co.uk/news/article-9049861/Councils-net-record-1-76bn-parking-fees-dont-
expect-relief-year.html
19https://www.britishparking.co.uk/write/Resourcelibrary/Research/Public_Perceptions_of_Parking__B

PA_Dec2020.pdf
20 https://www.gov.uk/government/publications/civil-enforcement-of-parking-contraventions/guidance-

for-local-authorities-on-enforcing-parking-restrictions#setting-charges
21https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/7

66844/The_High_Street_Report.pdf

outlets are basking is, in large part, owing to the complete shutdown of their ‘brick’
competitors and bucks the trend of recent years. In 2019, Internet retail sales had slumped
to a growth rate of just 10% yet by the end of 2020, it had shot upwards to 37%. This
escalation, which is a considerable sharpening of online retail’s growth trajectory, is solely the
result of a disequilibrium. In February 2020 19.1% of retail sales were performed online and
by November it was 36.2%. This rapid growth of 17.1% over just a few months far surpassed
any previous surge that online retailers had enjoyed. For reference, between November 2006
and November 2017, the share of the retail market that was online grew by 17.2%. The
straightforward conclusion to be drawn from these statistics is that ‘click’ retailers have been
one of the few ‘winners’ of the government’s lockdown measures and restrictions.

The government should seek to rebalance the scales somewhat. This would not be a
pernicious attack upon those who conduct business online, but rather a recognition that
internet traders have been at a considerable advantage since the arrival of Covid-19. Indeed,
even before the pandemic the disparity of charges faced by physical retailers – that online
competitors avoid - was widely noted as being counterproductive for small businesses in
particular.

In February 2020, footfall on Britain’s high streets was just over 150 million. This had
plummeted to less than 35 million by April. The UK retail sector is in unchartered waters and
as such requires every measure available to be deployedThe government must ignite a flare,
and send a signal to businesses and consumers alike, that the UK’s town centres and its
physical retail sector are worth fighting for. As such, it is only fitting that those physical retail
outlets - that in otherwise viable times - would constitute upwards of 70% of total U.K. retail
sales should be given the same leniency that is afforded to their online competitors. Rishi
Sunak must, upon the ending of lockdown, double down on his suspension of business rates
with a VAT reduction applicable to all ‘brick and mortar’ retailers. Allowing the prices in shops
to compete with the prices that can be found online would be a progressive move that would
be in-step with the way that the general debate is heading.

Countries such as Italy, Turkey and India have all taken measures which seek to redress the
existing - and now exacerbated - imbalance between those who opt to start their enterprise
in the heart of a community, and those who deviate from making such a social contribution
by performing their business through faceless ecommerce. Of course, the lower prices
afforded by online retailers is welcomed and greatly appreciated by consumers, but so to is
the bustle and thriving atmosphere of a vibrant and fighting-fit town centre.

Similarly, the OECD and G20 have been engaged in considerable international discussion over
how best to overcome the problems that internet retail brings. However, these ideas centre
around an Online Sales Tax that many in the U.K. see as a “viable alternative” ( in the words
of the Treasury Select Committee). The IBN believes that, whilst a long term review of the
applicability of such a tax must be properly considered, that to truly create an immediately
applicable dynamic and level- playing field the VAT rate payable by physical retailers must be
reduced to 14%. Such a cut would be both symbolic and practical in nature. By allowing all
businesses that qualify to pay business rates to reduce their prices by 5% the government

would be throwing its support behind a sector that is important economically, socially and
culturally. On top of this, the fall in costs would evidently have a desirable impact on footfall,
which is expected to languish close to 60% below pre-COVID levels. The IBN calculates that a
5% VAT cut for physical retailers until the end of 2021 would cost approximately £7.6bn

4. A Government advertisement campaign
             "you should avoid pubs, clubs, theatres and other such social venues".
                              “Stay home. Protect the NHS. Save lives.”
                                     “Act like you’ve got it (Covid)”
                                            “People will die.”

Since the arrival of Covid-19, the Government has spent vast sums of money actively
dissuading people from partaking in the social activities that are the lifeblood of the static
hospitality sector. Not only have restaurants, pubs and eateries been forced to endure an
outright ban on trading, but they now also face a looming business context within which the
population have been told they are at serious risk. Analysis by the Independent Business
Network has found that the Cabinet Office spent, between March and November 2020,
£156 million on marketing and advertising campaigns with the explicit intent to stigmatise
the key pillars of static hospitality such as socialising in groups and spending long periods of
time in large-crowded rooms. Of course, this is to make no mention of the ubiquitous news
coverage that the pandemic has received for nearly 12 months. Early-stage academic work
has sought to discern the sheer level of penetration that the pandemic has received in the
UK’s news agenda, and its impact on individual behaviour, with worrying conclusions
made22.
The relaxation of restrictions over summer provides a case study for the negative impacts a
year of constant government messaging can have on the demand for static hospitality. In
July 2020 pub sales were 44.7% below what they had been in the same month the year
previously23. August also showed a depression of 9.4%24. Although this was a marked
improvement, it is of course worth noting that this was during the zenith of the eat-out-to-
help-out agenda, and that the overall context has dramatically worsened since then. In June
2020, before the reopening of hospitality, only a lukewarm 55% of people felt that they
should be allowed to resume business25 and only 25% of people felt comfortable returning
to hospitality venues straight away26.
The government must make a public commitment now, to assuage the growing concerns of
many pub owners about depressed demand, to financially support a nationwide advertising
campaign. It must be coordinated in conjunction with industry bodies, and at the very least
match the expenditure spent on last year’s anti-hospitality advertisement. It must show the

22
   JMIR - Collective Response to Media Coverage of the COVID-19 Pandemic on Reddit and Wikipedia: Mixed-
Methods Analysis | Gozzi | Journal of Medical Internet Research
23
   Pub and restaurant groups see sales halved in first month back – Davis Coffer Lyons (dcl.co.uk)
24
   • COVID-19 UK pub/restaurant re-opening sales change | Statista
25
   The public increasingly concerned about next week’s lockdown easing | YouGov
26
   RSPH | One in two won’t feel safe visiting pubs for at least three months, as more businesses reopen this
weekend

significant work undertaken by the hospitality sector to keep people safe and must seek to
highlight the relative safety that the vaccine rollout will provide consumers. There is a
natural plateau in advertising, at which point excess spending becomes superfluous.
Analysing the monthly amounts spent by the Cabinet Office, it would seem that an
expenditure of £45 million per month would constitute a sizeable and effective budget for
this campaign. Continuing at this rate for 4 months would cost the government £180
million.
Combining this messaging with a second the eat-out-to-help-out offering is a must in order
to persuade individuals to return to venues. However, lessons must be learnt from last
August’s scheme, and the government must not place arbitrary limits on the funds available.
Rishi Sunak originally set aside just £500 million for this scheme, and whilst the outlay did
ultimately end up reaching nearly £850 million, the future manoeuvrability of the scheme
was undermined by the fact it had gone over budget. This time, it is imperative that the
government gives itself suitable flexibility to prolong the scheme if required. Bearing in mind
that just 46% of the population participated in the scheme last time, the IBN expects that
this figure will initially be much lower as restrictions are only gradually lifted. This must
mean that the scheme, in tandem with the advertising, should run for a period of up to four
months; giving people time to capitalise on the scheme and to become reaccustomed and
confident in visiting hospitality venues.