I am sure the ‘Eat Out to Help Out’ scheme needs little introduction as many of us have been enticed by these big blue words for the last month, seizing the opportunity to fill up on our favorite foods for the mouth watering discount of 50% off. Now that the scheme is over, it is useful to reflect and consolidate the effects of the scheme and understand what its purpose was, whether it achieved the goals for which it was laid out, what this means for the future of the British economy and was it really worth it?
What was the scheme?
The scheme was announced in mid-July by Chancellor Rishi Sunak, offering customers up to £10 off per person per meal for non-takeaway food and non-alcoholic drinks from Monday to Wednesday during August. Bills were slashed by 50% for customers eating-in at about 80% of pubs and restaurants. The ‘Eat Out to Help Out’ scheme was pitched as part of Sunak’s plan to help the UK economy recover from the coronavirus lockdown, specifically targeting the hospitality sector. Other measures announced at the same time included a VAT cut for tourism and hospitality by 15%, a £2 billion Kickstart Scheme and an £8.8 billion investment in new infrastructure projects, all with the intention of supporting and creating jobs in the UK. But no proposition has captured the country’s attention like this particular measure.
What was its purpose?
The hospitality sector was already noted to be in danger back in 2018: the Guardian reported the number of UK restaurants collapsing had risen by 1/5th in the previous year. Major chains such as Jamie Oliver and Byron Burgers had closed multiple branches across the UK. Back in 2018, the impact of Brexit had resulted in less Europeans coming to the UK, thus putting a strain on the availability of staff, fuelled by the rise in legal minimum wage. Further, the Guardian also reported that the fall in the value of the pound had made potential take-home pay less attractive for international workers, as well as raising costs in general.
Jump to 2020, the hospitality industry was reported to be the worst hit by the pandemic. ONS figures reported that food and beverage service sales had declined by 83.4% compared to the same month last year. Even though there were slight signs of recovery during the summer, the UK was still confirmed to have entered into a recession. Given that the UK hospitality industry is 3rd biggest employer in the UK, accounting for 1.2 million jobs through direct employment (in 2017), generating over £72 billion of Gross Value Added to the UK economy, with a further £86 billion indirectly, the recession should come as no surprise. The coronavirus pandemic has revealed that the hospitality industry was still highly unstable and perhaps on more uncertain territory than economists had initially expected. Reportedly tight cash flow, high overhead costs and the reliance on tourism were already negative inclinations for the direction of the sector. The pandemic certainly did nothing to help.
There have been questions as to why the hospitality industry was targeted as a method to boost the economy? Evidence from 2008 may have been part of the inspiration, as recovery from the last recession saw the hospitality sector could be a key contributor to jobs, filtering into the tributaries of industry all of which could help the economy recover. Or maybe it’s just because it was the easiest way to get everyone to spend money and contribute to the economy. 50% off food! Who would say no to that? Well, photographs from up and down the country indicate that not many people did. But did the scheme live up to its expectations?
So, what did it achieve?
The immediate, visible change that the scheme brought was the number of people there were outside again. 64 million meals were reported to have been claimed by the 4th week. D & D London explained they had doubled their bookings across 38 restaurants across the UK, and Jay Rahman of Blue Tiger in West Yorkshire says that he believed ‘Tuesday and Wednesday [was going to be] the new Friday and Saturday’. Importantly, 1.8 million jobs have been supported through the scheme, and inflation, which was previously forecasted to be a negative rate (CPI) was 0.2% as reported in mid-September. On the surface, it certainly seems like the scheme was extremely successful. However, the picture may not be as perfect as it seems.
Was it worth it?
The FT reports that while millions came out of the sanctuary of their homes to claim their discounts, overall sales were down by ⅓ in comparison to 2019. Furthermore, restaurants and pubs have had to invest a great deal of money into making their premises COVID friendly. The new dining format includes plexiglass screens, face shields for staff, QR code menus, not to mention extensive cleaning regulations, all of which is sure to have cost a substantial amount of investment at a time when revenue was far below what these vacinities would have considered ‘normal.’
The additional danger is the potential for false hope: participating restaurants are sure to see a huge surge in sales due to the scheme, especially considering the plummet they had endured for the previous 7 months. However, this could be misleading, masking the true state of the business. Businesses may be tempted by the positive boost to rehire staff or make other such investments, when the consumer trend as presented in during August is unlikely to last for the long term. Keeping in mind that children are filtering back into schools, sales would fall during this time of year in ordinary circumstances. There is the added danger from the absence of a tourist season this year. The tourism industry contributes £106 billion to the British economy and GDP, supporting over 2.6 million jobs, and so the absence of revenue over the summer months means the support businesses may usually expect during these lapsed months is virtually non-existent.
The government furlough scheme is also coming to an end, meaning the costs and decisions businesses will have to make in regard to its employees is highly pressurised, exacerbated by the suggestion of a second wave. The second wave comes with an added threat of a second (albeit, milder) lockdown. The government announced that from Monday 14th September, groups of more than 6 people would be banned from meeting, in addition to the varying lockdowns in specific regions throughout August. The FT reports that leading scientists are suggesting a two-week national lockdown in October to tackle the gradually rising COVD-19 cases. With all of these factors, not to mention flu-season around the corner, it is hard to believe that the revenue from one month of discounts in just one sector will be enough to repair the UK economy.
Where do lawyers factor in?
The considerations outlined here are conducive to a common theme running through many pieces about the UK consumer industry during the COVID-19 crisis. Business will engage with commercial lawyers to guide them through these procedures. Employment lawyers will be called upon to advise business owners on how to deal with employees after the furlough scheme, while corporate lawyers may be hired to guide through restructuring and refinancing challenges. Health and safety regulations may need to be updated, contracts renegotiated, and property exchanged. In short, while there are a huge number of challenges that lie ahead for restaurants and businesses alike, lawyers from all practice areas work to guide and advise their clients through these troubling times.
So, did eating out actually help out? Given the number of factors to be considered in relation to the impact of the scheme, it may be too early to tell. Only in the coming months will we be able to see if stuffing ourselves with half price Nandos for a month was enough to save the economy.