The Beverage Standards Association brings you Peter’s Monday 12th July 2021 Weekly Briefing every Tuesday morning.
Monday, 12th July Weekly Briefing
VAT reduction anniversary
Last Thursday (8th July) was the anniversary of the reduction in VAT, from 20% to 5%, on meals eaten out. This was initiated by the government “to boost cash flow and improve business viability” – certainly restaurants, pubs, and hotels, generally pocketed the resulting windfall by not reducing prices (which was partially academic anyway since few restaurant meals were being served to lockeddown customers at the time) – Fazenda, for example, revealed last week that it had used some of the windfall on a bonus for its staff.
Along with some other operators, Wetherspoons, true to its tradition, went the other way and passed on the reduction to its customers in the form of lower prices. This was always a poisoned chalice because, unless businesses were prepared to increase prices significantly when VAT was inevitably increased again at some time in the future, the hit to P&Ls would be grievous.
And now that VAT is set to increase to 12.5% in October (and then return to 20% next April), this moment of reckoning is approaching. It remains to be seen what operators will do.
Peters Monthly Report for June 2021 is now available here.
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