Double-digit price rises expected as VAT increases

HOSPITALITY businesses will have “no choice” but to pass on double-digit price increases to their customers as VAT returns to 20% tomorrow (1st April), UK Hospitality has warned.

VAT on food and accommodation in hospitality will return to 20% despite industry lobbying to retain the lower 12.5.% rate.

That increase will be accompanied by a range of other cost rises including the return of business rates bills, an increase in National Insurance and the minimum wage, soaring energy bills and rising food and drinks prices.

Paul Campbell of investment firm Hill Capital Partners said hospitality businesses are now “fighting an unprecedented wave of cost increases and doing all they can to keep prices down for their customers”.

“But the removal of VAT relief makes this impossible and will lead to more inflation and menu pricing will inevitably rise,” said Campbell.

UK Hospitality chief executive, Kate Nicholls, said the cost-of-living crisis for consumers, coupled with the return of the 20% VAT rate, “will prove nothing less than catastrophic” for hospitality.

“The now inevitable price rises for consumers will dampen demand and many hospitality businesses – one in three having less than a month of cash reserves and most are carrying heavy debt burdens – will fail as a result,” she said.

“This can only cause the UK’s wider economic recovery to falter.

“If the sector is to have any hope of playing its full role in fuelling the UK’s recovery then we need support.”