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Chancellor announces support for hospitality sector

Author: ICAEW Insights

Published: 21 Dec 2021

In response to pressure from ICAEW and other bodies to support hospitality, Chancellor Rishi Sunak, has announced some additional support measures for hospitality businesses.

Chancellor of the Exchequer Rishi Sunak has announced new coronavirus support measures for hospitality businesses after pressure from various bodies – including ICAEW – on him to act.

The Chancellor announced £1bn in financial grant support, through which eligible hospitality businesses can claim up to £6,000. He also added £30m to the Cultural Recovery Fund, to support theatres and museums. The Statutory Sick Pay Rebate Scheme has also been reintroduced for small and medium-sized companies. £100m of discretionary funding will also be available for Local Authorities to support other businesses.

“The emergency funding will give hospitality and leisure businesses some welcome respite and go some way to helping offset lower customer numbers during this important trading period,” Michael Izza, ICAEW Chief Executive, said. “Businesses still need certainty to plan however, so the government should give clarity as quickly as possible on whether more restrictions are on the way after Christmas.”

If further action is required to tackle Omicron, and is likely to last for an extended period, other targeted interventions will be needed to support cashflow for those businesses most affected, he explained. “ICAEW has suggested to HM Treasury that measures such as a temporary increase in the 50% business rates rebate, deferring this quarter’s VAT payment, and the collection of existing government-backed loans or VAT-deferred debts, would help struggling businesses and ensure they don’t start the new year on the back foot.”

Hospitality is currently trading at half of what it should be at this time of year, according to sales data. ICAEW Chief Executive Michael Izza called upon the Chancellor to reintroduce measures to support hospitality businesses in the short term.

Here is Michael Izza’s letter to the Chancellor in full:  

“I am writing regarding the challenging situation being faced by the hospitality sector in the face of  the spread of the Omicron variant, and to suggest options for support measures which could be  explored by HM Treasury. 

“As you are aware, ICAEW chartered accountants have been on the front line of the economy  throughout this pandemic, whether running their own businesses or acting as trusted business  advisers to many more. I have personally been hearing from our members working in, and  advising, the hospitality sector that many businesses are facing a very real risk of running out of  cash. 

“Most are, of course, heavily reliant on trading in November and December to give them the  working capital needed to cover overheads and get through the quieter January and February  months, before trading picks up again and gains momentum from March onwards.

The following comment, received from one of our tax practice members, summarises the situation on the front  line: 

“‘Having reviewed the sales data from the weekend, it is clear that the trading is less than half what  it should be at this time of year, and I will need to rework cash forecasts and assess how my clients  can survive the coming months. It is an industry that has been hit hard by Government restrictions  and guidance. The statement that there is support via business rates and a reduction in VAT is fair; however the VAT rate increases back to 20% at the end of March and the so-called recovery loan  scheme is impossible to obtain when there is a working capital need. 


“‘The hospitality industry desperately needs Government support, if I can’t help my clients and get  them through the coming months the impact is not just personal to them. The impact would also be  on staff, suppliers and also me as a sole practitioner. Having lost major clients due to the impact of  Covid, I don’t want to lose more even though I do everything I can to help them. I have a personal  and individual relationship with every client and need to ask the ICAEW to help them get the  support that they deserve.’

“There is a substantial risk that we will see businesses being closed permanently, rather than  premises simply mothballed pending a return to more normal trading conditions, an outcome that  would be devastating to the lives and livelihoods of those who run and work in businesses in this  sector. 

“We would strongly urge you and your colleagues to consider every opportunity to inject cash as  soon as possible, targeting help to those most valuable to the economy. In considering the tools to  hand, we would note that the following could relieve the imminent cash flow crisis: 

  1. The current quarter’s VAT payment could be deferred. This would be particularly useful for  SMEs using the cash basis for their VAT returns. 
  2. A temporary increase in the 50% business rates rebate, which is already targeted at this  sector. This could include increasing the amount per business not just per premises. 
  3. A business rates reduction back-dated to the date of the announcement of Plan B  measures on 8 December 2021 advising people not to come into the office to work. 
  4. A further immediate VAT reduction to help those still able to trade, using standard industrial  classification codes. 
  5. Reopening the grant schemes used earlier in the pandemic. 
  6. Deferring collection of existing government-backed loans or VAT-deferred debts. 

“ICAEW would be happy to discuss these measures further with your officials, as well as any others  being considered, if that would be helpful.” 

Government support in response to Omicron

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