Over 200 UK Hospitality CEOs Sign a Letter Urging the Chancellor to Keep VAT 12.5% Indefinitely
The CEOs of the UK’s most popular pubs, bars, restaurants, cafes, hotels, leisure parks, nightclubs, entertainment venues, and visitors’ attractions have signed a letter to the Chancellor ahead of his budget on Wednesday 27th October. Industry executives have urged for a permanent lower VAT rate for hospitality and tourism to help them rebuild enterprises and contribute fully to the nation’s recovery, as well as real support for business rates.
The Letter emphasises the benefits of a permanent 12.5% VAT rate for the business, which include:
- Stopping price increases for hardworking families.
- Making it possible for the sector to create new employment.
- Higher salaries and greater training are encouraged
- Unlocking capital to create a more sustainable future.
- Allowing the sector’s enterprises to stay internationally competitive.
“Hospitality is a crucial component of the UK economy, with the potential to be at the heart of the Government’s objectives to Build Back Better,” said UK Hospitality Chief Executive, Kate Nicholls. We can help with job creation, levelling up, and the path to net zero, but we need the government to join us.
“According to current plans, VAT will revert to its pre-pandemic level of 20% in April, resulting in increased prices for consumers at a time when they can least afford it.” For companies, it will trigger an inflationary spiral, undermining wage growth, reducing demand, and eventually threatening jobs. It will come at the same time as the elimination of business rate reliefs on outmoded valuations.
Today, Hospitality pays 10% of the rates bill for a sector that contributes about 3% of GDP. On top of that, we have a persistent labour shortage, supply chain challenges, general cost inflation, and an increase in the National Living Wage and National Insurance Contribution.
“Fundamental changes are thus critical to the industry’s survival, a fundamental component of which will be maintained VAT at 12.5% in perpetuity”. This will help to avoid massive issues, allowing operators and their team to focus time and resources on what they do best: creating economic growth and servicing their communities.
“In the long run, there is little question that reverting to the higher VAT rate will impede the industry from fully participating in the Government’s levelling up the programme and delivering on its pledge to focus on excellent work, better skills, and higher pay.” That is why the Chancellor must maintain VAT at 12.5% for our industry indefinitely.