The UK hospitality sector has appealed to chancellor Rishi Sunak to maintain VAT levels at 12.5 per cent to allow the industry to continue to rebound post-pandemic and reduce the need for major price rises.
Trade body UKHospitality has written to Sunak asking for him to extend the temporary lower rate of VAT beyond March for the sector to allow “many fragile businesses to continue their recovery, to protect jobs and to help stave off higher inflation”.
Under current government plans, VAT on accommodation, food and non-alcoholic drinks will return to the normal rate of 20 per cent from April.
More than 250 business leaders from hospitality and leisure have signed the letter to Sunak, including several hotel groups, such as Apex Hotels, Hilton, IHG Hotels & Resorts and Savoy Hotel Group.
Kate Nicholls, CEO of UKHospitality, said: “There are many compelling reasons why VAT should be held at the current rate given the current circumstances.
“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 highlights how the lower rate of VAT has enabled hospitality businesses to survive during the pandemic, but warns of the impact of inflation on the industry with rising energy, transport, wages and food and drink bills.
UKHospitality said that putting VAT back up to 20 per cent in April could force businesses to “significantly raise their prices” and add further to inflation. It will also coincide with an increase in the UK’s national minimum wage, as well as changes to business rates relief.
A survey of UKHospitality’s members found that 93 per cent of companies planned to increase prices by around 11 per cent in the next few months.
Nicholls added: “We have had a very challenging two years where hospitality was hit first, hardest and longest. This industry has borne the full brunt of the economic restrictions due to Covid.
“Companies have no cash in the bank and are being squeezed from all directions. They must pass costs on or go bust. The only question is by how much prices rise.”