Hospitality businesses speak of hopes for Spending Review
"I've made myself redundant. I own a cafe but I'm going to have to get another job as I'm unable to pay myself," says Rob Downham.He is the "chief wizard" at The Steel Cauldron, a magic-themed cafe, not near Hogwarts but in the slightly more mundane setting of Broomhill, a suburb to the west of the city centre."We keep hoping it is going to get easier, but this is the most difficult year we have had."The National Insurance and minimum wage increases plus a reduction in customers coming out and spending has combined to make it almost unsustainable to keep running a small business," he explains.
Rob runs the hospitality business with "chief witch" and wife Nikki.The couple's cafe sits in a busy shopping precinct in a neighbourhood popular with families and students but the business has been through a very bad spell."We opened on the day Boris Johnson told us that Covid was going to be a global pandemic so, in just over five years, we've had more challenges than I could possibly list," he says.Although lockdowns may be a thing of the past, a drop in customer spending is now top of Rob's worries."People are feeling the pinch due to the cost of living crisis and there is a lack of confidence. "People think things are going to get worse so they start saving rather than spending."As well as food and drink the pair host craft sessions, baby groups, "potion brunches" and magic events. They rent out the top floor as a themed apartment and are also planning to open an escape room.
Small business have been hit hard recently. From April, they had to start paying higher National Insurance contributions for staff, higher National Living Wages and higher minimum wages for younger employees and apprentices.The rate of VAT - the tax paid when buying goods and services - is 20%, one of the highest rates for hospitality in Europe.UK Hospitality, a trade body for the industry, says a lower rate of VAT would allow businesses to keep prices more affordable. Rob hopes Chancellor Rachel Reeves will pull a rabbit out of the hat and reduce VAT."In the last six months we've lost over £20,000 but at the same time, we've contributed over £30,000 to the Treasury."We turn over about £300,000 a year, which on paper sounds quite good for a small cafe, but our expenses in the last year were £330,000."That loss was only £30,000 because myself and Nikki effectively worked for £3 an hour. It's only us sacrificing our own financial wellbeing that has keep the business going," Rob says.The government says if it lowered VAT it would mean either higher taxes elsewhere, increased borrowing, or reductions in government spending to offset the revenue shortfall.Rob warns small businesses "will not be there" if nothing changes. And his wife Nikki says closing the business is not an option."We are strong, persistent and bloody minded and we really love what we do. "We have awesome customers and it's such a lovely thing to be able make people happy," she smiles.
Tim Nye owns three Marmaduke cafes in Sheffield and met Sir Keir Starmer when he visited one of the cafes during the 2024 General Election campaign.He says the government needs to do far more to help food and drink venues, saying it is "so much harder than I ever imagined"."We are struggling, so I can only imagine what some businesses are suffering at the moment."In our last financial year, we contributed £300,000 just in VAT. Add on to that, nearly £100,000 in National Insurance and over £1m in wages," Tim explains."Our existence contributes hugely to the economy, hospitality is massively important in this country and high streets are relying on us doing well but it is a battle.""This should be a worry for everybody, because it seems the recovery of the High Street is largely predicated on food and drink venues being successful," he adds.
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