Cheers! UK Chancellor of the Exchequer Rishi Sunak’s budget poured double measures for pubs on Wednesday, with cuts to alcohol duties and business rates.

But there are some reasons to call time on the celebrating.

First, the good news. Simplifying, and in many cases reducing, alcohol duties will be helpful to pubs, bars and restaurants, many of which have endured extremely difficult trading conditions over the past 18 months.

The chancellor also announced a 50% reduction in business rates for one year from April, cutting taxes up to a cap of £110,000 per business. There were some extra measures on rates too, including freezing the amount that a property’s value is multiplied by to determine how much tax is paid, and more frequent property revaluations. The latter is crucial to ensure tax rates are based on the accurate value of properties, reflecting, for example, if they have been affected by shopping moving online or once-popular high streets becoming shabbier.

Shares in British pub operators J.D. Wetherspoon rose about 5%, and Marston’s was about 6% higher.

But investors may be getting ahead of themselves.

For a start, the cap means that for most large retailers, the temporary 50% reduction won’t make much difference. The £110,000 is probably the tax paid on a large store. Similarly, the limit means the benefit won’t even touch the big pub groups’ tax bills.

As for hospitality businesses, while the changes to alcohol taxation are useful, value-added tax on the food they serve is set to rise from 12.5% to 20% in April, just as their crucial summer holiday season starts. That’s going to hurt alongside accelerating inflation throughout the sector, from higher coffee prices to wage increases to fill vacancies.

More fundamentally, Sunak is merely tinkering with the business rates system when the retail and hospitality industries have been calling for a much deeper root-and-branch overhaul.

One way to address the burden of business rates, which disproportionately affect brick-and-mortar companies with large property estates, is through an online sales tax. The government said on Wednesday that it would consult further on this route.

But as I have noted, an online sales tax is complex. Issues that need to be considered include whether the charge should be on sales or deliveries, given that many goods are ordered online and collected in stores. So-called click and collect is vital to the health of many high-street shops. There’s also a risk that the tax is passed straight on to customers rather than digested by the big internet-based retailers.

Though the budget announcement will be helpful, more tough decisions will be needed soon. Retail and hospitality businesses face one of the toughest trading environments in living memory. Amid shortages and rising prices, shoppers are becoming concerned about a resurgence in Covid-19 cases. Worries have shifted from not being able to buy a turkey for Christmas to fears that they will face another locked-down holiday, this time without the support of the furlough scheme. That is already starting to affect buying habits.

It won’t be long before it’s last call at the post-budget party.

Bloomberg Opinion. More stories like this are available on bloomberg.com/opinion


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