Hong Kong's 2020 Budget: How Does It Help Restaurants, Hawkers and F&B Businesses?

How is Hong Kong's F&B Industry Faring Currently?

Unfortunately, 2019 was already not a good year for Hong Kong's F&B industry which saw "its first annual decline in earnings since the SARS outbreak in 2003." It is likely for this downward trend to persist as the Coronavirus continues to run its course. A government spokesman in Hong Kong confirmed that "The food and beverage sector has been facing an even more difficult business environment recently due to the threat of the novel coronavirus. The outlook down the road depends critically on how this situation will evolve."

How is the Coronavirus Affecting Small Hong Kong Restaurant Businesses?

Small Hong Kong businesses are definitely seeing a loss of business thanks to the Coronavirus. According to several sources, loss in revenues have dropped anywhere from 20 percent to 70 percent. Below are some statistics from interviews conducted with Hong Kong restaurant owners:

In February, David Leung Chi-wai, chairman of Seafood Delight Group said that some of his restaurants were experiencing a 50 to 70 percent drop in revenue. 

Gordon Lam Sui-wa, who runs 616 hotpot shop in Whampoa, said that his restaurant and other outlets under the same brand, were also suffering greatly after the Lunar New Year period. He revealed that "restaurants in residential estates suffered a drop in revenue of 20 to 30 per cent from the same period last year, while sales figures at other outlets in busy districts such as Yau Ma Tei, Mong Kok, Tsim Sha Tsui and Causeway Bay plunged by more than 50 per cent."

Finally, Ma Ming-hei, who owns a cha chaan teng (which is a local Hong Kong café) said that his earnings were down by 50 percent on weekdays and 60 percent on weekends.  

How is the Coronavirus Affecting Large Hong Kong F&B Enterprises?

Hong Kong's F&B enterprise businesses have seen a mixed bag of results pertaining to the effect of the Coronavirus on business operations. While traditional restaurant-based businesses reported losses, delivery businesses like Deliveroo saw an increase in business. Below are some statistics from interviews conducted with large Hong Kong F&B enterprises:

One of Hong Kong's largest restaurant chains, Fulum Group, closed down all its operations on the 19th of February after one of its staff was found to have the Coronavirus. 

Another Hong Kong listed enterprise company, LH Group, shut down operations in about 40 percent of its restaurant locations on the 13th of February.  

Hong Kong delivery giant, Deliveroo, on the other hand, has seen a large upturn in orders, which is in sharp contrast to most table service restaurants in Hong Kong. The company announced that "its volume of orders jumped 60 per cent month-on-month in January." This increase is likely due to the "work-from-home policy widely adopted by city employers." 

How Much Money Will the Hong Kong 2020 Budget Designate to F&B Businesses?

The total amount designated for Hong Kong's 2020 budget is expected to be HK$120 billion, with an additional HK$20 billion being offered in "concessionary low-interest loans to support smaller firms." Of this amount, there is HK$3.73 billion being set aside for the F&B industry; specifically, those 28,000 businesses with food licenses. The subsidy-based budget aid for Hong Kong's food and beverage industry will be split into the following two categories under the Anti-Epidemic Fund: 

1. Food Licence Holders Subsidy Scheme

F&B companies with a general restaurant licence, a marine restaurant licence or a canteen licence are eligible to receive a one-time grant of up to HK$200,000.

F&B companies with a light refreshment licence, such as bakeries, food factories and siu mei or lo mei (local Hong Kong cuisine restaurants) are eligible for a cash grant of HK$80,000 each. 

2. Licensed Hawkers Subsidy Scheme

Hawkers with a valid hawker license (which must remain valid when the application is approved) will be eligible for a subsidy of HK$5,000 each.

*Applications must be sent in by May 4th, 2020, by 5pm.

How Does Hong Kong's 2020 Budget Benefit F&B Businesses?

F&B businesses in Hong Kong are set to receive a mix of tax reductions, waivers, fee reductions, utility discounts and even low-interest loan options. These benefits can all be found detailed below:

1. Profits tax will be lowered as part of the 2020 budget. This means that 141,000 people can benefit from this tax break. The tax break will be applied for 2019/2020, and will be capped at HK$20,000.

2. Waivers will also be introduced. For example, "the rates for non-domestic properties for all four quarters of 2020-21 will be waivered." 

3. Business registration fees for 2020-2021 will also be waived for 1.5 million business owners. The registration fees for all annual returns for two years will also be waived, which will benefit 1.4 million businesses. 

4. Non-domestic electricity, water and sewage accounts will all be discounted. Electricity will see a discount of "75 per cent discount up to a ceiling of HK$5,000 for four months." Water and sewage costs will "be discounted by 75 per cent up to a cap of HK$20,000 and HK$12,500 respectively."

5. A concessionary low-interest loan with 100 percent government guarantee for enterprises will be open for applications for 6 months. There is a "maximum loan amount of HK$2 million, with a repayment period of up to 3 years. Moratorium on principal repayment for first 6 months."

How Does the Hong Kong 2020 Budget Benefit F&B Employees?

Hong Kong F&B employees will benefit from several measures put in place to help alleviate the pressures of the Coronavirus outbreak. These measures include cash handouts, salary tax cuts, rent reduction and transport subsidies. The details of these benefits can all be found below:

1. Financial Secretary Paul Chan Mo-po announced a cash handout of HK$10,000 will be distributed to all Hong Kong Permanent Residents over 18 years of age.

2. All employees will benefit from a salary tax cut of 100 per cent for the 2019-20 year up to a ceiling of HK$20,000. This measure is set to benefit 1.9 million Hong Kong taxpayers.

3. Rates for residential properties will be waived by a maximum of HD$1,500 per quarter. This measure is set  to include 2.93 million properties.

4. Tenants living in government public housing will see one month of rent waived. 

5. Benefits pertaining to Work Incentive Transport Subsidies are also in progress. 

Moving Forward for Hong Kong

Even though the Hong Kong 2020 budget "will substantially contribute to the government's 2020-21 deficit," government leaders are confident that the city will be able to weather the storm. Financial Secretary Paul Chan Mo-po said that "strong fiscal reserves mean Hong Kong is well placed to weather these "rainy days." 

As for those in the F&B industry, it is possible that the Hong Kong government will continue to introduce measures to help in the coming years. Financial Secretary, Paul Chan Mo-po also "suggested that significant changes to the Hong Kong tax system may be required in response to local fiscal needs." What exactly these changes will entail is yet to be seen, but it is certain that the government seems to be aware of the struggle that Hong Kong is currently facing.