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VAT should remain at 12.5%, UK Hospitality coalition urges

Coalition of UK industry bodies highlights growing concerns over the future of hospitality businesses and jobs if VAT rises to pre-Covid level as planned in April 2022 


UK Hospitality coalition has urged the Prime Minister to keep VAT at 12.5% | Photo credit: Kris Atomic via Unsplash



UK Hospitality and tourism bodies have signed a letter pressing Prime Minister Boris Johnson not to raise VAT on businesses in their industries when a temporary reduction expires in April 2022. 

The UK government slashed VAT to 5% in July 2020, in a bid to support hospitality businesses recovering from pandemic trading restrictions. It remained at 5% until 31 September, 2021, when it was raised to transitionary 12.5%. Under the Treasury’s current plans, VAT on hospitality and tourism sector purchases will rise to the pre-pandemic level of 20% in April 2022.

The letter stated that keeping VAT at its current rate of 12.5% will support the UK’s economic recovery, safeguard millions of jobs and allow firms to pay higher wages and improve training opportunities.

Signed and coordinated by trade body UK Hospitality, the letter included signatories from the Night Time Industries Association, the Scottish Tourism Alliance and the Welsh Tourism Alliance.

“The pressures on business at present are well-documented and are already creating inflationary pressures. Increasing VAT for our sectors back to 20% will push many to breaking point,” part of the letter states.

In September 2021, UK Hospitality CEO Kate Nicholls highlighted that the hospitality industry lost two thirds of its normal revenue over the last 18 months, with 10% of businesses permanently closing and staff headcount declining by almost 30%.
 
The UK hospitality industry was hit hard by Covid-19 lockdowns, trading restrictions, and social distancing measures, with a fragile recovery threatened by staffing shortages and Brexit-related supply chain problems. More recently, hospitality businesses have been hit by surging energy costs driven by record gas prices globally. 

World Coffee Portal data shows Covid-19 disruption caused a near 40% sales decline among UK branded coffee chains in 2020, with the total number of outlets shrinking 1.9% and nearly £2bn ($2.8bn) wiped off the market value.

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