Hospitality and tourism sector ramps up pressure on Chancellor over VAT

21/10/2021

Pressure is being ramped up on the Government by the hospitality and tourism sector to keep the rate of VAT at 12.5 per cent.

It comes as new figures from the Office for National Statistics (ONS) showed the economy grew by 0.4 per cent, driven largely by those sectors.

The tax rate rose from a temporary five per cent to 12.5 per cent at the beginning of October and is scheduled to return to 20 per cent next April.

Now a prominent coalition of the country’s hospitality and tourism trade has written to the Prime Minister urging him to keep VAT low for businesses in these vital sectors.

Signatories to the letter include UKHospitality, Sacha Lorde, London First, New West End Company, Night Time Industries Association and the Scottish Tourism Alliance.

Co-ordinated by UKHospitality, the letter argues that keeping VAT at its current rate of 12.5 per cent for these sectors will help to accelerate the UK’s economic recovery from the pandemic, safeguard the future of businesses and millions of jobs and allow firms to invest in their workforce with higher wages and improved training opportunities.

The rise in activity in the accommodation and food services sector, boosted the economy in August as more people dined out, went on holiday and attended music festivals.

The ONS said the services sector made the biggest contribution to economic growth in the first full month after all Covid restrictions were lifted in England.

Activity in accommodation and food services rose by 10.3 per cent in August, within which hotels and campsites recorded 22.9 per cent growth.

Arts, entertainment and recreation grew by nine per cent, boosted by sports clubs, amusement parks and festivals.

The letter added that with UK businesses feeling the impact of a multitude of cost pressures and labour shortages, keeping VAT at 12.5 per cent permanently will help keep prices more affordable for customers and unlock investment in local communities and coastal areas across the UK.

The letter states: “All of us in the hospitality and tourism sectors share that ambition and our businesses are present in all parts of the country. We will be critical to your levelling-up agenda and we are eager to play our part. To facilitate our role there is one crucial lever that Government can pull – to keep VAT at 12.5 per cent.

“The pressures on business at present are well-documented and are already creating inflationary pressures. Increasing VAT for our sectors back to 20 per cent will push many to breaking point. Retaining it at 12.5 per cent will relieve upward pressure on prices and will leave people with more money in their pockets, while delivering on our shared goals.”

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