Government Support for Restaurants

May 14, 2021

What’s happening and what more could governments be doing?

The coronavirus pandemic has been – and still is in many regions worldwide – the most catastrophic event to ever hit the modern global restaurant industry. Never before have we witnessed so much destruction in our industry and seen so many businesses unable to save themselves from going under.  

In natural disasters like these, we turn to government support to help us as both businesses and individuals, but the numbers are showing that current efforts are falling short of saving many hospitality businesses.

Industry body UKHospitality has estimated that 640,000 jobs were lost across the sector during 2020 alone, despite the furlough scheme and grants. With this figure rising further in 2021.

The National Restaurant Association in the US reported 110,000 permanent restaurant closures over 2020. 

With many reports claiming that it could be another year until a ‘new normal’ is established, the restaurant industry surely needs a more robust plan in place to survive the uncertainty.

So, what are government bodies in the UK, US and Europe currently doing to help?

UK: In the UK’S march budget, available from April 2021 the Government’s latest business support scheme, the Coronavirus Restart Grant, became available. The grant is available to businesses that are allowed to reopen from April, such as those in non-essential retail and hospitality. The amount that businesses are entitled to could rise up to a one-off payment of £18,000, depending on the size and sector of the organisation. However, many worry that because of rent debt, most of the grants simply won’t be enough. The hospitality sector is going to benefit from a decrease of VAT to 5% until September this year. From September, VAT will be increased, but only in instalments.

Europe: The EU member states are all handling the restaurant industry crisis in widely different ways, and with varying success. Ireland, unfortunately, has no dedicated support scheme for restaurants, but counts on restaurateurs to make use of the Covid19 Credit Scheme, enabling interest free loans to businesses who need it. France has its “solidarity fund” which enables restaurant owners to claim up to €10,000 in funds to support them. In general, very few motions have been made in the legislature to support hospitality businesses and the gig workers they employ in Europe.

US: The CARES Act of 2020, passed by the former administration, was criticised heavily for falling short with the hospitality industry. On March 7th, Biden signed the new $1.9 trillion Covid relief plan into law that prioritises the restaurant industry. It is called the American Rescue Plan Act and contains a $28.6 billion direct aid clause for restaurants. This includes payroll tax breaks until August, an extension of the Paycheck Protection Program loans and food assistance funding.

Can more be done to support hospitality businesses?

In the main, the broad stroke of government support available to restaurants across the globe has been monetary. The cash is, of course, a welcome boost to anyone in this ailing industry, but what about preventing the loss of revenue and profit in the first place?

Rent and delivery costs are the two main areas that seem to be consuming the restaurant industry worldwide. Both are necessary to keep the lights on until restaurants are able to reopen this Summer.

Here are four ways we think federal support could go further in these areas.

  1. Rent assistance

Rent has been the largest strain on restaurateurs in populus areas like London, Paris and New York. And, while the government grants could help pay for the rent for a few more months, the main issue plaguing small to medium sized restaurant chains is the debt build up from last year.

Canada’s government saw this and announced a tiered rent subsidy scheme in November 2020 to enable landlords to recoup some funds from the government to keep establishments open

2. Employee benefits for delivery workers

Delivery is the lifeblood of the industry now and the gig workers who run it are the driving force. There have been calls for better protection and benefits for delivery workers across the EU and US. Spain is leading the way, as it is the first country to decree that delivery workers be given employee status. This is part of a wider European campaign to support delivery drivers from all major delivery companies. The UK, The Netherlands, France, and Belgium are all expected to follow suit in the coming months.

3. Capping delivery fees

Overall, governments and state leaders have been reluctant to impose delivery fee caps on the large companies like DoorDash, UberEats and Deliveroo.

In the US, various states such as Ohio, New York, Texas and California are considering fee caps of 15% for food delivery apps. Given that delivery fees can rise to 30% or more, this has been celebrated in the industry. Such legislation in the UK and EU could be a game-changer in the restaurant industry as it recovers.

4. Lower tax rates on delivery food

Perhaps if delivery fee capping is not feasible, a tax break on delivery food could be. Delivery sales are vital to the restaurant industry, so by having lower VAT or sales tax rates on delivery items, restaurants can offset the cost of rising operational expenses due to delivery fees.

Overall, it’s vital that we all do everything we can to get hospitality back on its feet.

There are some key organisations that are offering great support and helping the hospitality industry to be heard. Organisations like the National Restaurant Association (US), UKHospitality (UK) and Restaurants Association of Ireland (EIRE) and all leading the way and are only made stronger by the support of those most affected. Let’s get involved and make necessary changes happen.