Britons Dine Out on Sunak’s Tab But Virus Could Wreck Recovery
Britons Dine Out on Sunak’s Tab But Virus Could Wreck Recovery
(Bloomberg) --
Tables were packed this week as diners took up the U.K. government’s offer to pay half the cost of meals out, in an effort to boost Britain’s beleaguered hospitality industry.
“The last three days have been the most incredible of my forty years in business”, said David Page, Chairman of The Fulham Shore Plc, which owns chains of Greek and Italian restaurants. He has seen revenues more than double compared to last year. “I’m amazed, I’m not sure I’ve processed it yet.”
But other restaurant owners warned the subsidy may not be enough to save their businesses. As the threat of a deep recession persists, these measures will count for little if the government fails to get control over the pandemic and tighter restrictions on social contact come back again.
More than 73,000 outlets have signed up to the government’s “Eat Out to Help Out” program, which Chancellor of the Exchequer Rishi Sunak announced in an attempt to revive an industry ravaged by the pandemic. Under the plan, the Treasury will pay 50% of the cost of meals, capped at 10 pounds ($13) per person, on Mondays, Tuesdays and Wednesdays through the month of August. The total cost has been estimated at half a billion pounds.
It’s an eye-catching plan to address one of the hardest hit sectors, unveiled as part of the government’s wider effort to boost consumer confidence and revive the economy. About 80% of hospitality businesses closed in April and 1.4 million workers were furloughed, according to officials.
“Most of what the government has done has been too late, but this is a brilliant initiative,” said Graham Dimmock, as he ate at Anupam, an Indian restaurant in Malvern, western England, on Wednesday. “I’m 70, so apparently in a very vulnerable group, and it’s encouraging us to come out for a financial reward, whereas we may not without it.”
Table Service
Waiters in visors milled around socially-distanced tables as Dimmock spoke and one-way signs marked a path through the restaurant, which was full all night.
“The demand is unbelievable,” said manager Maher Kazi. He said the program’s key achievement has been to instill confidence in customers, but a change in VAT sales tax rates - to 5% from 20% - announced at the same time has made a bigger difference to his business. “We’ve been running for 33 years and Covid nearly ended it, but that made us more confident,” he said.
But Tom Molnar, chief executive officer of Gail’s, a chain of bakeries in southern England, said the program needs to be linked to longer term pandemic control initiatives if it is to revive the industry.
“Discounting people to get out is not the long term answer, or even a medium term answer,” Molnar said in an interview. “In the absence of good public health policy, it won’t be valuable.”
The government is already preparing for a new surge in infections, buying up drugs ahead of the winter and local lockdowns on areas where the virus is taking off again. Johnson has said he wants to avoid a full national lockdown again, but it remains an option.
As businesses struggle, restaurant and pub workers are face an uncertain future. A survey this week by U.K. Hospitality, a trade association representing the industry, found three quarters of businesses in the sector are at risk of insolvency and will come under increased pressure as the government unwinds its furlough job retention program. It called on ministers to extend tax reliefs and help with rent.
U.K. Government Job Support Exceeds 40 Billion Pounds
The “Eat Out to Help Out” program is a “welcome measure” but “there are still places that aren’t yet able to open and therefore can’t benefit,” said Tony Sophoclides, strategic affairs director at U.K. Hospitality. These venues will be asked to contribute to furlough costs for staff while still not having revenue and will need help, he said.
Despite having a 300% increase in bookings this week, compared to the same days last year, Gavin Adair, managing director of Rosa’s Thai Cafe, a national chain, agreed. Rent support “may have been a better or more targeted use of the money,” he said.
Ghost Town
There is also concern that restaurants in city centers will be harder hit than those in suburbs and towns as diners shy away from using public transport for an evening out. Central London is “like a ghost town”, according to Fulham Shore’s Page, who said many West End locations are still closed as there is “no point.”
Though one sector that has seen a boost is the capital’s fine dining scene, which has become more accessible as a result of the government subsidy. “It is an absolute godsend. It has turned Wednesday into the new Saturday,” said Vivek Singh, owner of The Cinnamon Club.
Sarah Tagger, 26, a Californian masters student at the London School of Economics, said she had used the program to visit restaurants she might not otherwise have been able to go to. “What better way to try all the places I had been meaning to visit?” she said. “This was an incentive to stop by sooner and eat well.”
Though people using the government subsidy to visit high-end restaurants may need to drink a bit more if they really want to help out.
Paul Hood, who holds a Michelin star at Social Eating House, said he had triple the normal bookings on Tuesday and Wednesday but it was “like tap-water central.” The vast majority of diners were opting for the set menu rather than the more expensive a la carte.
“I don’t blame people. It is great deal. But as a business, you would like people to spend more on wine and cocktails,” he said in an interview. “Still, it is great that everyone is getting their confidence back to come out to eat.”
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