Business leaders warned there was a ‘long hard road back to full economic health’ as investors gave a muted response to Rishi Sunak’s latest Covid-19 rescue package.
Bosses welcomed a string of measures from the Chancellor to kick-start the economy, including VAT cuts for the hospitality sector and £500million of restaurant discounts to coax families out of lockdown.
Travel and leisure businesses, such as hotels, cinemas, theme parks and zoos, will also benefit from the VAT cut, which provides a £4.1billion taxpayer-funded boost to the economy.
Bosses welcomed a string of measures from the Chancellor to kick-start the economy, including VAT cuts and £500m of restaurant discounts to coax families out of lockdown
But industry chiefs said the measures were not a quick fix, and investors struck a sceptical tone.
A range of hospitality, travel and leisure stocks made significant gains as the Chancellor announced a temporary cut in VAT from 20 per cent to 5 per cent.
But in the afternoon a sell-off left most of the major listed firms down for the day.
Shares in the Restaurant Group – which owns the Wagamama chain where the Chancellor volunteered after making his summer statement to the House of Commons – leapt 13 per cent during the speech, but dropped back to close 4 per cent down at 55.9p.
Similarly, Greggs, whose takeaway sausage rolls benefit from the cut in VAT and the discount deal, saw its shares rise 1.1 per cent during the speech, before closing down 1.9 per cent at 1589p.
Deaf ear to plea for flight tax cut
The Chancellor has snubbed travel industry calls to temporarily suspend or cut a key flight tax.
Rishi Sunak left air passenger duty alone despite pleas from airlines to cut it. The tax on flights from UK airports is charged to airlines, many of which pass it on to customers.
Questioned about whether he was considering a cut or suspension of the charge, he said he would ‘bear that in mind’ when it comes to a planned review of the sector.
Launched in 1994, the duty was set to bring £3.7billion into the Treasury’s coffers in the 2019/20 year.
Ahead of the March Budget airlines had been hoping for a cut of at least 50 per cent by the end of the year.
Whitbread, which owns Premier Inn, rose before dropping back to 2262p – 1.8 per cent down compared to Tuesday’s close.
The Institute of Directors said that Sunak, 40, had shown a capacity to ‘adapt as the situation moves’ but warned Britain faced a ‘long hard road back to full economic health’.
Kate Nicholls, the boss of UK Hospitality, said: ‘This [package] doesn’t mean we are out of the woods. There are still significant challenges ahead.’
Andrew Kenny, managing director of Just Eat, said: ‘We are now at a significant turning point. There is no doubt that restaurants are facing an uncertain future with significant challenges ahead.’
Under the ‘Eat Out to Help Out’ scheme, customers will also get a state-funded half-price discount, up to £10 per person, if they buy a meal or hot takeaway food between Mondays and Wednesdays in August.
But some businesses, such as sandwich shops and pubs that do not serve food, will miss out as VAT on alcohol and cold takeaways will remain unchanged.
The Chancellor was praised for riding to the rescue of the hospitality and travel sectors, which have been left stricken by the 15-week coronavirus shutdown.
Jane Pendlebury, the boss of the Hospitality Professionals Association, said: ‘The latest measures are a huge relief.
‘The reduction will provide businesses operating on wafer thin margins with some essential breathing space, helping them to recover and rebuild.’
The British Beer & Pub Association ‘warmly welcomed’ the package of support but said it was only a ‘first step on a long road to recovery’.
Pub stocks failed to benefit from the Chancellor’s announcement as investors judged that a 15p cut in VAT on food would not be enough to turn their fortunes around.
Marston’s shares fell by 5 per cent to 49.6p, while Wetherspoon, which has 875 outlets and serves food, fell back 3.1 per cent, or 31.5p, to 975.5p.
Nevertheless Wetherspoon chairman Tim Martin said he was ‘extremely grateful’, and the boss of brewer Fuller Smith and Turner, Simon Emeny, said ithe measures would ‘provide the stimulus we need to get customers back into pubs and the wider hospitality sector’.
Industry sources said that customers may be disappointed as cash-strapped companies keep prices high to boost their margins.