Labor shortages cause most problems for London restaurants

Earlier this month, London restaurants officially entered their post-pandemic ‘new normal’, which is to say that the various protections, tax cuts and schemes designed to relieve businesses during a period of immense disturbances have ended or changed.

In short, April 2022 was the month where the most things changed in the most significant way since March 2020, when the arrival of COVID-19 caused the government to shut down hospitality.

Earlier this month, Chancellor Rishi Sunak’s spring statement was branded a ‘missed opportunity’ by those in the hospitality industry, as the extension of a reduced VAT rate was not met. announced.

Now that the dust has settled on that statement and other measures have come into effect, Eater London spoke to accountant and financial adviser to the restaurant Hussein Ahmad in Viewpoint, whose clients include Ombra, Westerns Laundry, Mangal 2 , Brunswick House, Bright and others, to get a clear picture of where restaurants currently stand with regards to labour, VAT, national insurance, loan repayments, rent holidays and professional prices.


Labor shortage

“Probably the most pressing issue” is the labor shortage, Ahmed said.

Not only because of a literal shortage of workers, who left the industry during the pandemic or left the country due to the implementation of Brexit and Britain’s formal exit from the European Union , but also because the staff asks for more.

This, Ahmed said, is partly because they value themselves more when they see lucrative job offers. They then feel justified in asking their employer why they are not paid the same.

And because of the shortage of workers, restaurants have to close shifts or even close certain days because they don’t have the staff to cover those shifts.

Another impact is this: whereas previously, to meet budgeted staff costs, restaurants reduced employee hours, they no longer want to reduce staff hours in case those staff go elsewhere. Now it is the restaurant, not the worker, who bears this cost.

In addition, staff accept positions and do not show up because they have been assigned a role elsewhere. Ahmed says it’s “anecdotal but not something pre-pandemic that I would have heard of.”

It comes after UK Hospitality chief executive Kate Nicholls said earlier in April 2022 that a failure to tackle the [labour shortage] problem now “will stifle the sector’s ability to drive the broader economic recovery”.

“We want to work hand in hand with the government to review, revise and reset all the policies we had before Covid to ensure that the immigration, training and skills policies we have now are fit for a job. -pandemic market.


VAT

Since April 1, the value added tax (VAT) rate has returned to its pre-pandemic level of 20%.

For a period of 15 months between July 2020 and October 1, 2021, the VAT rate was reduced to 5% (on food and non-alcoholic beverages), which was a lifeline for restaurants and businesses. hospitality industry at large.

The government has staggered its return to the full rate of 20%, increasing it from the rate of 5% to 12.5% ​​between October 2021 and March 2022.


national insurance

Chancellor Rishi Sunak’s recent spring statement included little cause for celebration from restaurant industry players. Except for one policy: Sunak raised the network card threshold for hospitality workers. In other words, implemented a change that increased the tax-free allowance, thus allowing, at least in theory, workers to keep more of their take-home monthly pay.


Moratorium on rents

During the pandemic, the government has sought to protect restaurant tenants from landlord eviction for unpaid rent due to business disruptions due to closures, which had reduced or completely eliminated their income.

The moratorium on forfeiture of the lease, as it was officially called, has been extended several times throughout the pandemic. As of March 31, 2022, it officially ended.

While he acknowledged it may still be too early to make a meaningful judgement, Ahmad said he hadn’t heard of any closures due to the end of the moratorium. (Except for Sarap Baon.)

There are also certain periods of the pandemic, from March 2020 to July 2021, which are still protected, which means that landlords cannot use all measures to demand rent that has not been paid during this period without go through mediation. However, for sums due beyond July 2021, landlords can demand payment from tenants and bring these disputes directly to court, without going through a mediation process.

So far, the wave of closures widely predicted has not happened. This could of course change, and only time will tell how effective the moratorium has been in delaying the inevitable, or otherwise.


Holiday Business Rates

One of the COVID-19 relief policies put in place for hospitality businesses remains active. Business rates – a tax paid based on the value of the property – were suspended in 2020-21. From April 2022 to March 2023, companies are only required to pay 50% of these tariffs up to a value of £110,000. It applies to a company’s entire portfolio, so it’s not per site. If a restaurant group has multiple locations, the £110,000 rebate is capped across all of them.


CBILS

Along with tax breaks, rent and rate holidays and legislation introduced to prevent evictions, the government has also created a whole coronavirus business interruption loan scheme. These loans were issued for an interest-free period of 12 months until March 31, 2021.

Since then, repayments of these loans also include interest payments.


A reminder of London restaurants that we know have closed so far in 2022.

A reminder of restaurant openings in London so dar this year.

And, finally, Eater London’s list of the most anticipated restaurant openings in spring 2022.

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