We need to ease the struggle of bricks-and-mortar businesses – not pile on more taxes

Even before the pandemic, many of the UK’s small businesses, pubs, shops and restaurants were dying a slow death. If we’re serious about saving jobs, it’s time Johnson and Sunak scrapped business rates and made things easier, writes Chris Blackhurst

What next for pubs and restaurants now that Rishi Sunak's Eat Out to Help Out scheme has ended? (PA)

According to Westminster chat, when the business secretary, Alok Sharma, told Boris Johnson in lockdown that 3 million jobs could be lost if the hospitality sector was not able to resume trading in time for the summer, the prime minister is said to have replied, “Christ.”

Johnson had no idea, apparently, that so many people worked in pubs and restaurants. Their trade had been frozen during lockdown and they needed to reopen their doors, and fast.

The government eased the restrictions and also introduced the discount scheme to encourage diners to eat out again, and it has been a roaring success. That initiative has now ended, and the industry is heading back to where it was.

Other steps designed to ease the pressure on businesses struggling to cope with the fallout from the pandemic are also finishing or winding down. Now the talk is of tax rises to help pay for the cost of the outbreak.

It’s tempting to view commerce as the main target – that a load added here and there is not going to hurt too much, and that private enterprise can absorb a bit more pain. But before we get carried away with heaping on tax increases, we should consider just where business was before the coronavirus hit.

Either you can approach the hospitality industry as a target for increased revenue and expect it to stump up, or you can regard it as the funder of 3 million people’s jobs – but you cannot do both

Take that same hospitality sector, the one the prime minister seemed to know so little about. For every £1 it received before the pandemic, a typical pub or restaurant was paying 55p in some form of tax. And I am not including corporation tax here – that comes later, on the profits.

No, I am talking about 55 per cent of everything going to the government. Mark Derry, who runs 38 Brasserie Blanc restaurants and upmarket gastropubs via the Brasserie Bar Co group, took me through the tally. “By the time we’ve paid the employer’s contribution to PAYE, national insurance, VAT, business rates, wine duty and the apprentice levy, which is so complicated that most businesses do not recover it, we’re looking at losing 55p in the pound.”

Derry says: “If you add together all the tax we pay, it comes to 55 per cent. It’s gone up steadily over the last decade.” And, he emphasises, that does not include corporation tax, which is over and above that total.

Neither does it take into account the cost of the national minimum wage. Ever since it was launched, the minimum wage has climbed in value, so that, Derry says, it has added 10 per cent to his turnover. His labour bill, which used to be 28 per cent of turnover, is now 37 per cent. “However which way you look at it, our industry has been squeezed and squeezed,” he says.

The consequence is that in order just to stand still, businesses like his have had to grow – every year, year upon year. The result is that valuations have fallen. Roughly, they’re down by two-thirds over the past 10 years. So why bother? Why do it? “You’re right, it’s death by a thousand cuts,” says Derry, shrugging. “We do it because it’s a very slow death.”

Already, some 2,000 dining pubs and restaurants are reckoned to have vanished. If you assume each location employed 25 staff on average, that’s 50,000 jobs lost.

Others are set to follow. The accepted wisdom is that this is a sector, and there are others, that has expanded too rapidly, opening all over the place, often driven by ambitious private equity owners.

The reality, though, is that there are much bigger problems embedded in the system that are more to blame. The fundamental issue for the Treasury is this: either you can approach the hospitality industry as a target for increased revenue and expect it to stump up, or you can regard it as the funder of 3 million people’s jobs, but you cannot do both.

We want to grow our tech industries, regarding them as the future, but they do not provide many jobs. We still have to reply upon, and foster, those good old-fashioned industries that create employment for millions – something Johnson was made to suddenly realise.

This means, for a start, abolishing business rates and looking urgently at the other charges these businesses are required to pay. It means reviewing the red tape and bureaucracy so they can operate effectively. And it means levelling the playing field with those tech firms that do not have anything like the same tax obligations and burdens.

We have to extricate ourselves from a cycle of decline where bricks and mortar is concerned. What’s happening is this: our traditional businesses are struggling for the reasons outlined by Derry; many are giving up the struggle, and as they do, our town centres and high streets become depressed; those areas are miserable and nobody invests, so they wear a forlorn, abandoned, shabby appearance; no one wants to shop or drink or dine there, so footfall and income decrease further; premises close; jobs go, and so the downward trajectory continues.

This was occurring well before Covid-19. All the pandemic has done is to exacerbate the weaknesses and tighten the spiral.

The danger posed by the virus, hopefully, will soon fade or disappear. But if Johnson supposes that that will be the end, that Britain is about to enjoy a bonanza, he should think again. Businesses were suffering before, and they will suffer again. He needs to have a word with his chancellor and find a cure.