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The VAT Cut, how it could a double edged sword for your business

#vat #mcdonalds #%5

Paul Francis


wood dice with a white background. 1 dice has a percentage symbol

This morning I did the usual thing that the majority of people my age do...I checked my phone.

I normally go through my emails first, as I find the various attempts to steal my data laughable; they give me a good ‘joke for the day’.

Today, I was greeted by an email from McDonalds - apparently from the CEO himself, Paul Pomroy.

As anybody keeping up with lockdown news will know: a VAT reduction has been issued to the food, drink and hospitality sectors. Lowering it from 20% to 5%. This move has been welcomed by many, but it could have drastic effects on how a company is perceived by the paying public.

McDonalds in the UK and Ireland earned £341 million in profit during 2019, with ‘Mr Email’ Paul Pomroy paying himself a fantastic wage of £783,000 (source: link). 

As you can see, McDonalds doesn't need you to suddenly flood its doors with your custom; however, your local, struggling cafe, which makes the majority of its income from builders’ breakfasts, does.

McDonalds not only announced the VAT reduction within their email, they also made it a public affair. It wouldn't surprise me if adverts pop up on YouTube and in other media outlets in a matter of days, advertising the savings they’re passing on to you, the customer.

Wow, what a company!

Sure it is...

picture of a mcdonalds sigh with the 24hour symbol under it.

picture of a mcdonalds sigh with the 24hour symbol under it.

McDonalds CEO earned £783'000 in 2019

McDonalds could have easily afforded to pay its staff during this pandemic without taking money from the UK government to pay staff wages. But it didn’t. It took the handout, whilst companies like Game Workshop (who earned a pre-tax profit of £80 million in 2019* - about 77% less than McDonalds. Source Link) are paying back the furlough payments they received on a matter of principle and because they’re able to do so; they’re not legally required to reimburse the government.

Pomroy’s email is nothing but a crowd-pleaser, engineered to make McDonalds appear as ‘the good guys’.

Large announcements like this can be seriously damaging to small businesses that might be looking forward to additional income. By keeping their prices the same, smaller companies can try and recover profits lost due to lockdown; however, their reputation could be forever tarnished if customers see them as ‘money hungry’ and ‘greedy’ in comparison to the likes of the international burger franchise. Some customers may even attempt to destroy the little guys, via bad reviews and scathing social media posts.

McDonalds could very easily have lowered their price without having to make a massive fuss about it, thus allowing smaller companies to choose the course of action necessary for the future of their little business.

Well done, giant corporations. You may have forced everybody's hand.

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