ohOn October 2, Simon Wood, a data manager, became MasterChef winner, closed the doors of his restaurant in central Manchester after seven years. “No one is safe in this climate,” Wood says. “Tom Brown’s Restaurant [Michelin-starred Cornerstone] He’s gone, Le Gavroche is gone, there’s Monica Galetti [a judge on MasterChef]Michael O’Hare [in Leeds]Glynn Purnell [in Birmingham]” he added, listing a who’s who of Michelin-starred chefs who have closed their restaurants in recent months citing changes in the market and costs.
He opened his eponymous restaurant in 2017 thanks to its success in MasterChef 2015 when it impressed the judges with dishes like octopus and chorizo and pigeon and blackberry, but like thousands of restaurants in recent years, it has succumbed to the pressures of declining traffic, high taxes and rising energy, labor and food costs.
Now the hospitality industry is warning that Wednesday’s budget could be “catastrophic” for many more small businesses like Wood’s. They warn that employers’ planned increase in national insurance, on top of already costly living wage increases, could push businesses over the edge. There are also concerns that tax and business rates reliefs given to them during Covid may not be extended. While restaurants received a reprieve during the pandemic with grants, loans, tax cuts and programs like Eat Out to Help Out, many are now saddled with debt from rent arrears and payments from recovery and business interruption plans of the government.
Since 2019, the number of restaurants in the UK has fallen from 25,628 to 20,170, a drop of 21 per cent, according to AlixPartners’ CGA and Hospitality Market Monitor.
Wood, whose son Cameron, 25, was also a chef at his restaurant, warned: “We will lose many others too.
“The government, for all intents and purposes, believes it is doing the right thing, but it is getting workers on its side by promising the land and then SMEs like me have to deliver and it just isn’t possible.”
Yesterday it became known that Reeves will increase employers’ IN by up to 2 percentage points. However, plans for a new IN that would tax employers’ pension contributions have been thwarted.
Mark Derry, chairman of the Heartwood pub collection and Brasserie Blanc restaurant chain, said: “Well, it’s a relief, obviously, about pensions, but there are many more issues around employee pay and conditions. which are extremely disturbing. .”
Tom Brown’s Michelin-starred Cornerstone restaurant in Hackney Wick, London, closed in June 2024 after six years.
AKIRA SUEMORI – SUNDAY
Reeves is expected to confirm further pay rises in the budget. The legal minimum wage for people aged 21 and over, known as the national living wage, rose to £11.44 in April, but the government-appointed Low Pay Commission has suggested it should rise again to around £12.10. from April 2025. for 18- to 20-year-olds will also increase under government plans to eventually align them with the national living wage.
In July, the government told the commission it had to consider the real cost of living when considering pay increases. Companies say this has added pressure at a time when changes have been made to zero-hours contracts, which unions said were being used to trap workers in insecure, low-paid jobs.
The Working Rights Bill will give workers the right to a contract that reflects the number of hours they regularly work and require companies to give “reasonable notice” or compensation if shifts are changed or cancelled.
Wood said: “It will kill off SMEs because hospitality doesn’t work like that. If I give someone 30 hours and then have a client that night, what do I do?
Restaurants and pubs suggested customers were already eating out less in anticipation of a series of tax rises on Wednesday that could hit them.
It has been suggested that Labor ministers could reduce stamp duty brackets and possibly reduce the amount of tax-free cash savers can withdraw from their pension funds once they retire.
“It is no coincidence that our figures have gone down since Sir Keir Starmer talked about how bad the next budget was going to be. “A lot of our customers are scared to death,” said Richard Johns, chef and owner of The Plow Inn, in Wombleton, North Yorkshire.
The Prime Minister said in August the Budget would be “painful” after saying the Conservatives had left a £22bn black hole in the public finances. He has pledged not to raise taxes on “workers,” but when pressed to define this, he said last week that it included people who “normally get paid in a sort of monthly check” rather than those who make money through assets and stocks or who had the ability to “write a check to get out of trouble.”
Restaurateurs say they are as concerned about what could be omitted from the budget as what could be included.
More than 13,000 people have signed a petition urging the government to reduce the VAT rate on food and drink from 20 per cent to 10 per cent, which would help them compete with supermarkets where VAT is not applied to products.
UK Hospitality, the industry body, is also calling for an extension to business rates relief. Businesses received a 75 per cent discount in 2020 to ease the impact of Covid-19 on the hospitality sector. However, this will end in March 2025, leaving companies facing a four-fold increase.
Wood, for example, was paying business rates of £23,000 a year, but these were due to rise to £93,000 in the spring when the relief ended. He also paid £360,000 a year in wages and £144,000 a year in rent.
Rachel Reeves, the chancellor, delivers her budget on Wednesday
AARON CHOWN/PA
Russell Nathan, senior partner at auditor HW Fisher, said it made financial sense for the government to provide more support to restaurants. Hospitality is the UK’s third largest employer with 3.5 million people. According to UK Hospitality, it generated £54 billion in tax revenue in 2022.
“The cost to HMRC in lost tax when a restaurant fails is enormous. “We need a task force to investigate what is causing these failures and how the government can help,” he said.
Mark Fuller, who owns the Karma Sanctum Soho hotel in London and runs his restaurant Wild Heart with Michelin-starred chef Garry Hollihead, says restaurants have been forced to raise prices due to skyrocketing energy bills and rising food inflation, which has discouraged customers. during the cost of living crisis.
“You go to Paris and Barcelona and it’s a culture to go out to dinner, but those restaurants tend to have very reasonable prices,” he said. “Here you are paying £1.50 for a fig, wholesale.
“We need the government to give us the tools to offer food at a better price. You can’t do that if business rates go up, rent goes up and VAT stays the same.
“If the budget doesn’t act on some of these things, they’re going to be destroyed because restaurants employ a lot of people.”
Fuller said restaurants were still dealing with staff shortages, which he attributed to Brexit. “The government needs to allow us to bring people from abroad; there are not enough British staff available. A chef applied for a job and wanted £50,000 a year and his past experience was at KFC. “Restaurants are having to pay a lot for something mediocre.”
There are signs that hospitality is recovering. CGA recently reported the first quarter-over-quarter increase in hospitality net openings in two years. Between March and June of this year, there were the equivalent of five net openings per day of restaurants, bars and pubs; However, it is casual dining chains that are leading the way, rather than restaurants.
Wood, who is calling for a hospitality minister, said: “The government, and those who came before them, don’t care when a restaurant fails because there is always someone else who will fill that void and say ‘it’s my lifelong dream to be a restaurant owner.’ ‘. a wine bar or a restaurant.
“They use their life savings or an inheritance to open one, then they fall by the wayside and another one comes along. And so it goes.”