Bagel Company Sounds Alarm Over Hospitality Crisis

The owners of The Hutong Bagel Company, the popular establishment near Royal William Yard, have issued a fervent plea for action to safeguard the beleaguered hospitality industry. Jack and George Harman, alongside Jack's wife Emma – affectionately known locally as "The Three Musketeers" – have penned a passionate Substack message, urging fellow businesses to convene next month and tackle what they describe as a "death spiral."

The Harmans echo the stark assessment of Kate Nicholls OBE, chief executive of UK Hospitality, who has lamented the current state of the industry as "worse than COVID." Since last autumn's budget, the sector has shed an alarming 84,000 jobs, a figure the Hutong owners assert is "totally at odds with the vision to deliver growth."

The brothers and Emma highlight a "double concussion" delivered by the government last autumn: a hike in National Insurance contributions and a rise in the minimum wage, both without accompanying tax relief. These, they argue, compounded the impact of soaring energy costs from the previous year, which saw The Hutong's own energy bill skyrocket by an "utterly bonkers £33,000."

However, The Hutong's principal grievance lies with Value Added Tax (VAT). They contend that the current 20% VAT rate, applied to turnover rather than profit, is a "real killer." They illustrate this with the example of a £3.50 coffee, where 58p is immediately siphoned off as VAT before any operational costs are met. The core issue, they explain, is the disparate VAT rates for different food items; while whole coffee beans are zero-rated, brewing them incurs a 20% VAT liability.

This inflationary mechanism, they claim, forces businesses to raise prices, pushing the cost of a coffee towards £4. Citing a UK Hospitality report with Deloitte statistics, The Hutong owners assert that the VAT increase has contributed significantly to the national CPI rate, impacting Bank of England decisions and consumer disposable income.

A recent UK Hospitality survey underscores the gravity of the situation: one-third of businesses are operating at a loss, 76% have increased prices, and 63% have reduced staff hours. Furthermore, a third of businesses are restricting opening hours, and four in ten have curtailed investment.

The Hutong champions UK Hospitality's #TaxedOut initiative, advocating for a reduction in VAT to 12.5%, aligning with rates seen during the pandemic and in other European countries and the USA. They point to a 2022 study projecting that a 12.5% VAT rate would create over 286,000 jobs and generate £7.7 billion in additional sector turnover over ten years, delivering a positive return on investment for the government within five years.

In response, The Hutong, alongside Plymouth businesses Zephyr Burgers and Nora's, is convening a meeting next month for local hospitality owners. The agenda includes a "temperature check" of businesses, sharing #TaxedOut materials, and formulating a proposal to present to Plymouth's MPs, the City Council, Business Improvement District leaders, and the Growth Board, urging their support for the initiative.

Are you a Plymouth hospitality company and do you want to know more about attending this meet up?

Link to the meet - https://www.eventbrite.com/e/plymouth-hospitality-meet-up-noras-tickets-1510623578789?aff=oddtdtcreator