UK fast-food and coffee chains cut prices as VAT relief comes into effect

The UK’s fast-food chains and coffee shops have set out the details of how customers can benefit from VAT cuts on food and drink that have come into force in the hospitality sector.

McDonald’s, Nando’s, Pret a Manger and Starbucks are promising price reductions on their menus after the chancellor, Rishi Sunak, announced VAT would be reduced from 20% to 5% from 15 July until 12 January 2021.

Sunak described the move as a “£4bn catalyst for the hospitality and tourism sectors, benefiting over 150,000 businesses, and consumers everywhere”.

The accountants at Deloitte said families were set to save more than £5 on a £45 meal out and even more on entrance to attractions. However, businesses do not have to pass on savings in full, or even at all, and the Treasury says some may struggle to pass on the cuts, having been closed for the past three months during lockdown.

Nando’s said all the benefits of the cut would be passed on to its customers via a reduction of prices across eat-in, delivery and online click and collect. For example, a quarter chicken is £3.70, down from £4.25, and family platters are £38.25, down from £43.70.

McDonald’s has recommended that its franchisees reduce prices on classic menu items, including 50p off its breakfast meals. From Wednesday morning, there is a 40p reduction on extra value meals, 30p off happy meals, as well as lower prices among its coffee range, such as 99p for black and white coffee, and £1.49 for lattes and cappuccinos. McNuggets, Big Macs and quarter pounders with cheese will also be 20p cheaper.

Starbucks said it would pass on the full discount on coffee served in company-operated stores to customers, although franchise owners will be able to make their own decisions.

Pret a Manger is to pass on the VAT cut to customers from Wednesday for all hot drinks and from Friday on hot food. It means a takeaway latte will cost £2.40, down from £2.75, while an eat-in tuna mayo baguette will be cut from £3.60 to £3.15.

Honest Burger – which has 38 UK outlets – said it was aiming to pass on a third of the relief directly to customers by dropping its prices across all food (including burgers, sides, sauces, double-ups) and soft drinks.