Failure to retain the 12.5% VAT rate “might prove fatal” for businesses
CHANCELLOR Rishi Sunak’s spring statement was a “missed opportunity” to help hospitality businesses recover from the impact of the pandemic, say trade groups.
Speaking in the House of Commons today (23rd March), Sunak announced measures including a 5p a litre cut to fuel duty and an increase to the National Insurance threshold.
However, a retention of the lower 12.5% VAT rate for food and accommodation in hospitality – which had been lobbied for by business groups – failed to materialise.
The VAT rate is due to return to 20% in April.
UK Hospitality chief executive, Kate Nicholls, said reverting to the 20% rate “is a real setback for thousands of UK hospitality businesses still suffering the devastating effects of COVID, and facing a tidal wave of rising costs”.
“For many businesses, the removal of the lifeline of a lower rate of VAT might prove fatal,” said Nicholls.
“For a heavily, disproportionately taxed sector a return to 20% dashes the hopes that many businesses could begin to recoup some of the losses of the last two years.”
British Beer and Pub Association (BBPA) chief executive, Emma McClarkin, said the group is “very disappointed that the chancellor decided not to extend the 12.5% VAT rate for hospitality”.
“The sector remains on a knife-edge as it emerges from the pandemic and the impact of the recent energy crisis and invasion of Ukraine has ensured the turbulent times will continue for pubs and brewers just as we had hoped to build the road to recovery,” said McClarkin. “The coming months could be some of the hardest yet for our pubs and brewers.”
And businesses “needed much more support” than was offered by the chancellor today, according to Steve Alton, chief executive of the British Institute of Innkeeping (BII).
“Whilst the chancellor has implemented a number of measures that undoubtedly will reduce the pressure slightly on cash-strapped consumers, the reality for our members is that they have to significantly grow revenues against pre-pandemic figures to even stand still,” said Alton.
“With devastated profitability, ongoing repayments of pandemic specific debts and rising staff and energy costs, these small businesses needed much more support to enable them to trade out of their fragile positions.”