Recovery could stall without extended tax support, industry leaders warn

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A new campaign is calling for Chancellor to ‘lock in’ low VAT permanently to boost hospitality and tourism sectors.

The #VATsEnough initiative is urging the Chancellor Rishi Sunak to make the 12.5% VAT rate permanent for hospitality and tourism.

Trade association UK Hospitality said the move would enable sector businesses to create 125,000 jobs, rebuild their balance sheets, boost investment, avoid damaging price increases and accelerate the UK’s post-pandemic economic recovery.

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The #VATsEnough campaign comes in the wake of the VAT rate for hospitality and tourism businesses rising to 12.5%, on 1 October.

While the Treasury’s landmark decision last year to reduce VAT for these sectors helped many venues survive the crisis, under current plans VAT will return to its pre-pandemic level of 20% come April 2022, just as next year’s peak season begins.

UKHospitality is now urging customers, suppliers, hospitality venues and employees to lobby their MPs on the need to lock in the 12.5% VAT rate for local pubs, bars, restaurants, hotels and other sector businesses.

Its calls are bolstered by YouGov research which shows that six in 10 adults (57%)who have a view believe that the hospitality sector VAT rate should not return to 20% next year and seven in 10 (70%) think the government has a responsibility to support the sector’s recovery.

Critically, half (49%) of the adult population say they will eat out less frequently if prices were increased in restaurants, pubs and cafes, according to the survey.

Industry experts claim that while businesses will pass on savings where possible, an increase in the rate of VAT from current levels will inevitably lead to rises in some prices in a vulnerable market. Taken together, this suggests a higher VAT rate will dent costumer visits to hospitality venues.

Nick Varney, CEO of Merlin Entertainments, which runs theme parks across the UK such as Alton Towers and Thorpe Park, said: “We urge the government to consider a permanent move to 12.5% VAT as the Treasury has already seen the genuine benefit in terms of driving demand. If the UK, and London in particular, are to recover, we need to be able to ensure Britain can compete with cheaper European holiday destinations and is attractive for both domestic and international visitors.

“Keeping domestic days out and short breaks affordable for hard working families in the UK should be our number one priority. Long-term, and post-Brexit, it is crucial that Britain competes internationally, and VAT is a key lever for Government to drive growth.”

Nick Mackenzie, CEO of pub company Greene King, added: “The VAT reduction has helped the hospitality sector stay afloat during the last 18 months, but we are facing continued long-term challenges. At Greene King, we have around 2,800 pubs in communities of all sizes and types, and making 12.5% VAT permanent will allow us to plan, invest, as well as create jobs across the country and support the government’s levelling up agenda.”

Compass Group has received £437m in government pay-outs to cope with pandemic

Tags : governmenthospitality
Andrew Seymour

The author Andrew Seymour

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