By Stephen Patterson, Chief Executive of NE1 Ltd, the Business Improvement District company for Newcastle city centre.
Newcastle is internationally renowned for its nightlife and hospitality scene. Mention Newcastle to a group of non-Geordies and hear them rave about the amazing time they had when they visited, a sentiment echoed by the people who live, work and study here.
Newcastle captures people’s hearts and a large part of this is because of the fun they have in the city’s vibrant hospitality venues. From Michelin-starred restaurants to awardwinning pubs and clubs, the city relies on this sector as much for its identity as its economic survival.
Sadly, the industry is on the brink and facing its worst crisis in living memory. If we don’t support these businesses now, we can’t feign surprise when they collapse.
The hospitality sector has been hit disproportionately hard by a relentless onslaught of tax rises and economic challenges. If Covid didn’t devastate the sector, rising fuel costs, the cost-of-living crisis, National Insurance hikes for employers and minimum wage increases have all dealt serious blows. For many, the abolition of business rates relief in last November’s budget was the final straw.
Hospitality makes up 31% of city centre businesses, yet was responsible for 51% of business rates rises, placing a disproportionate burden on these businesses and highlighting how inequitable the system has become.
Thankfully, hospitality owners are a resilient bunch. Perhaps that’s why successive governments have treated the sector as a cash cow. It remains one of the most highly regulated parts of the economy.
In response to pressure from NE1 and industry bodies, the Government rather belatedly accepted that business rates changes would cause harm and went back to its calculations to develop a support package.
The Government acted with a 15% reduction and a three-year price freeze, which is welcome, but is a sticking plaster for a gaping wound.
Make no mistake, this will result in business closures and job losses. We have already started to see the impact. There were sixteen closures last year and the usually buoyant openings have slowed to a trickle. This year, The Mushroom, Point Blank, and SIX at Baltic have all closed and it’s only March!
Pubs and independent music venues were singled out for what little relief was offered, but there was no lifeline for restaurants, cafes, hotels and other venues.
How do you decide which industry is worth saving? Clearly, the Great British pub was deemed worthy but one area of hospitality that has been largely ignored is hotels. They are large employers with high staffing costs, large buildings, soaring energy bills and increased competition, and face stratospheric rates rises with no relief.
You can’t keep hitting businesses with additional regulation and taxes and expect ‘business as usual’. Many profitable businesses would still be open had the Government acted differently and we now have a whole industry in peril.
In light of this crisis, we are renewing our calls for the Government to reduce VAT to 13% for the hospitality sector, bringing the UK into line with the rest of Europe, where rates are closer to 10%.
We are also working with licensees and the council to see what can be done at a local level. We have helped set up a Licensees Forum to improve dialogue between the sector and the council. We have three key goals: a vision that guides policy and supports the sector, repeal of the Late-Night Levy, and a review of the city’s pavement café policy.
None of these alone will save the sector, but together they will make a difference and mark the beginning of a more progressive approach that values its social and economic contribution to the city.
We welcome and support the formal consultation on repealing the Late-Night Levy. Introduced in 2013, it imposes an additional tax on businesses serving alcohol after midnight. With average profit on a pint only 12p after costs and taxes, landlords need to sell nearly 37,000 pints a year just to pay the levy – it’s easy to see why it is so unpopular.
The Newcastle of today is vastly different from 2013, when the levy was introduced. Then, the city had a reputation as the UK ‘party capital’, with ‘vertical drinking’, treble measures at extremely low prices, and 13 nightclubs, now we have only four. Newcastle is now known for traditional pubs, quality service, and food, and for being one of only four core cities with Michelin-starred restaurants. Credit goes to our local licensees who have invested to make this a reality. They deserve recognition and support.
Encouraging conversations about repealing the levy have been held with the Police and city council but more work is needed. Our hospitality scene is worth fighting for, and with collective effort we can create the best possible environment for the sector, and the city, to thrive.
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