UK: New chancellor Jeremy Hunt has announced that the majority of measures in his predecessor Kwasi Kwarteng’s mini-budget will be scrapped.
As the UK government aims to stabilise the financial markets, Hunt has announced he will get rid of most the measures announced less than a month ago.
Several of the new proposals will affect the travel and hospitality sectors. The energy price guarantee will no longer last two years – it will last until April next year and then be reviewed. Hunt said a Treasury-led review will take place to look at how households and businesses are helped with energy bills from April next year. Business support will go to those most affected and will incentivise energy efficiency, he added. No further details are currently available.
Elsewhere, a planned 1p cut in basic rate of income tax has been put on hold indefinitely – the rate will remain at 20 per cent. VAT-free shopping and an alcohol duty freeze will also be scrapped. Cuts to stamp duty and National Insurance remain in place, however.
UKHospitality CEO Kate Nicholls said: “Given the economic volatility we have seen over the past few weeks, we understand the need for the chancellor to announce these measures today, designed to deliver stability and restore confidence. I would encourage the government to work with the UK’s hospitality sector to unlock its enormous potential to support our economy in delivering growth, creating jobs and driving the recovery.”
“Prior to the energy crisis, which is proving to be so devastating, the sector was forecast to grow by three per cent and there is still a real desire from our dynamic hospitality businesses to return to those levels of growth. However, the hospitality sector is so exposed to this crisis and has been devastated by it, which is why the energy support provided by the government to help weather this storm, remains critically important and will help protect a vital industry. It’s essential that the government continues to work closely with the sector as part of its review into support post-April 2023,” she said.
“One area in dire need of urgent reform is the business rates system, which is currently not fit for purpose and places an unfair burden on hospitality businesses. This is particularly pressing now, given the additional costs hospitality businesses will now be facing as a result of the freeze on alcohol duty being scrapped,” Nicholls added.
Merilee Karr, CEO of UnderTheDoormat and chair of the UK Short-Term Accommodation Association [STAA], said: “Probably the most important thing that businesses in our sector want now is stability and certainty. The market and currency volatility that we have seen in recent weeks reduces consumer confidence and their ability to plan for the future, including for travel bookings.
“For businesses, the lack of clarity on the proposed new taxation and national insurance changes as well as exactly what support they will get for energy bills is creating unwanted distractions and hampering their ability to plan and price their accommodation. Our hope is that the government recognises that our industry has already endured huge upheaval over the last three years and despite that, come out strong.
“What we need is clarity and stability so that the short term and holiday rental industry can play our role in delivering the growth that the UK needs for future prosperity,” she added.
Kerrin MacPhie, chief executive of the mia, said: “The latest movements within government, including the appointment of Jeremy Hunt as chancellor, provide an appropriate reflection of the ongoing and unwelcome uncertainty the United Kingdom is facing once more.
“As the sector continues to implement its recovery plans, this is a further setback in confidence and leaves many organisations second guessing how policies may or may not impact them and their plans and decision-making in the near future.
“With a U-turn on the corporation tax freeze, the sector must now account for reduced net profits as it prepares for a 25 per cent rate from April 2023 – an increase of almost one-third. For a price-sensitive sector already facing significant demand challenges, many will now be accepting lower profits that indicate further setbacks on recovery plans. Devastatingly, some will simply not survive these additional blows, as we have already begun to witness business closures in recent weeks.
“Many will now be apprehensively awaiting the upcoming fiscal plan announcement on 31 October,” she added.
More industry reaction will be added as we receive it.