Over 250 hospitality leaders write to Sunak on VAT

More than 250 leaders from pubs, bars and hospitality businesses have written to the chancellor Rishi Sunak, urging the government to keep VAT at 12.5% beyond March 2022. 

In the letter, which can be seen below, the group call on the Treasury to maintain the current level to enable many fragile businesses to continue their recovery, to protect jobs and to help stave off higher inflation in the economy.

The current VAT rate of 12.5% on food and non-alcoholic drinks is set to rise to 20% in April, unless the chancellor intervenes. Many wet-led pubs and bars, however, are still highlighting that the 12.5% does nothing to help their businesses, as the reduction does not apply to sales of alcohol.  

Spearheaded by UKHospitality, signatories to the letter include individual businesses, SMEs and multi-national groups. Pub operators such as Fuller's, Greene King, Punch and Young's have all signed.

“There are many compelling reasons why VAT should be held at the current rate given the current circumstances," says Kate Nicholls, CEO of UKHospitality. "However, this is about so much more than an extension to temporary measures in the face of the challenges brought by Covid; it’s about working to establish the right tax level for our world-class hospitality and tourism industries. It is vital, in the interests of competitiveness, job creation, growth and ensuring hospitality and tourism play their full part in driving the economic recovery.” 

The letter goes on to highlight the success of the lower rate of VAT applied for tourism and hospitality (on food, accommodation and non-alcohol drinks) in enabling businesses to survive, protect jobs and to continue their recovery, despite “the ravages of the pandemic”. 

A major concern of the impact of the VAT rise is that businesses will have no choice but to significantly raise their prices, putting pressure on the cost of hospitality experiences and also further fuelling inflation across the economy.

In a recent study of UKHospitality members, 93% of companies said they intended to increase their prices by 11% in the next few months – double the headline rate of inflation in December 2021.

LETTER FROM BUSINESS LEADERS IN HOSPITALITY TO CHANCELLOR RISHI SUNAK

Dear Chancellor,

The reduced rate of VAT that you introduced as part of the Plan for Jobs has been an incredible success, helping us to sustain jobs and businesses despite the ravages of the pandemic’s various waves. It has been critical in keeping prices affordable for our customers.

The pandemic highlighted how much the nation has missed hospitality and tourism, and the important part it plays in our lives. However, costs are increasing and our customers are feeling the pinch. The imminent return to a 20% VAT rate will exacerbate the squeeze on household finances.

The increase in input prices to hospitality businesses have been absorbed, largely through the headroom provided by the reduced VAT rate. As costs relating to labour, energy, and food and drink supplies continue to rise, the reduced rate is ever more important.

The reduced rate also bolsters deliverability of many of the Government’s key policies – including levelling up, high street regeneration, employment and skills growth, and investment in net zero –allowing our sector to fully play its part in an economic recovery.

The Government has rightly celebrated being the most open nation in Europe following the Omicron variant. As we look to revive our tourism, maintaining a reduced rate of VAT is imperative, as it simply brings us in line with the levels of VAT levied in our competitor European nations.

The policy has been a resounding success and is central to our sector and the nation’s economic recovery. We therefore implore you to maintain VAT at 12.5% and witness the hospitality sector rebound strongly and deliver jobs and growth around the country.

Yours sincerely,

Kate Nicholls, CEO, UKHospitality

+261 business leaders 

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